Jump to content
House Price Crash Forum

Anecdotal Evidence Btl Madness


Recommended Posts

I spoke to a young professional chap this afternoon who informed me that he has purchased several properties over the past few years by applying for owner-occupier mortgages with different lenders. He buys the properties under the pretence of it being his main residence, then lets it out.

He has a friend who has purchased no less than 12 properties by this method. They are under the impression that lenders do not cross check for existing mortgages, as they are "in competition with each another". Frankly I am amazed if this is true. Surely it would show on a credit check?

He told me he was looking for another property to buy in London. I said prices were on the way down already, and he quoted the usual "prices never go down in the long run etc". I mentioned that yields are so low that you earn more in a savings account. He conceded that BTL these days is not about yield, it is a straight bet on capital appreciation.

It was an interesting insight into the mind of a BTLer. In investment terms, these people are what would be termed "risk lovers". They are prepared to take a chance as the potential returns, in their minds, are so great. They do not properly appraise the downside, unlike the "risk neutral" investor who is concerned about the most likely return.

This is why markets overshoot - people either do not care, or are to lazy to think about the potential downside. This attitude results in a small proportion of people succeeding beyond their wildest dreams, whilst most of them typically fail. Yes, its the same psychology you will find in casinos the world over.

Perhaps we need these people. Their risk taking often benefits mankind when they are taking a risk on something potentially useful - e.g. new technologies, pharmaceuticals etc. They willingly sacrifice themselves, and occasionally it benefits mankind.

Of course, BTL is not one of those useful ideas - just an also ran that will burn itself out.

Link to post
Share on other sites

I disagree, BTL has in the main been very successfull in providing flexible alternatives to a beleagured population.

Prior to BTL your only option was LA stock, and that was often very low quality on sink estates living alongside lifes undesirables which is not an ideal environment to bring up a family.

There remains a stigma when living in LA housing and although the parents might not be bothered too much, there are effects on the children at school.

BTL has taken up the slack that the wholesale selloff of LA property left behind.

For sure BTL has had a wider impact on availabilty of property with regard to the contention of the FTB'er pushing to join the market and the BTL Landlord pushing to build up their empires, however I would suspect the real figures behind the transactions involving BTL Landlords are negligable.

The real deamon behind HPI has been our old friend the Interest Rates, the only tool known to provide the throttling effect required to manage an economy. In this instance the throttle was opened to allow a consumer recover post Sept 11th, however yet again since London Attacks we see the VI talking about a reduction of rates to kickstart the economy.

However as was the case last time, the money is borrowed and has no stable platform to support it in the longer term. I am guessing that we will see the rates fall, and consumers again will be encouraged to borrow more money to buy our way out of a recession for another couple of years.

My prediction of a crash in late 2007 seems to be playing out quite nicely, I am banking on it quite literally.

Link to post
Share on other sites
Smell

This guy is a total BS*tter. 12 residential mortgages? No way. 3 or 4 in the old days before new regulations but 12 I think is impossible. I think you are dealing with delusions.

Or

He will get in serious trouble!

I fear it is the latter - I wonder how many people have engaged in similar games? It makes sense when I hear of people who buy houses in their children's names etc. I think there are a huge number of people with complete disregard for the legaity of their actions.

Link to post
Share on other sites
I fear it is the latter - I wonder how many people have engaged in similar games? It makes sense when I hear of people who buy houses in their children's names etc. I think there are a huge number of people with complete disregard for the legaity of their actions.

What happens when the mortgage lenders start auditing all these so-called OO mortgages, and find out they are actually BTL?

Presumably you at least have to pay the extra interest which would have been charged since you let it out?

frugalista

Link to post
Share on other sites
What happens when the mortgage lenders start auditing all these so-called OO mortgages, and find out they are actually BTL?

Presumably you at least have to pay the extra interest which would have been charged since you let it out?

frugalista

Lenders already know whats going on with regard to 'dodgy BTL'

Likewise with self certs and inflated earnings

Many lenders have recently tightened their lending criteria, but the last few years its been a free for all

They make money out of lending and when house prices are booming, they have no choice but to turn a 'blind eye' because if they don't lend, their competitors will and thats less profit and director bonuses for them

Its the same with credit cards - if you tighten lending criteria and lend responsibly, you get less business and that means less profit

When the bad debts occur as a result of 'dodgy lending' - it is written off against the massive profits that have been made

With regard to the 'breaking the law' aspect, some people of this site point out how much trouble these people are going to be in "Maximum 7 years in jail" etc,

Unless there has been a massive policy change by the police in recent months, most of this dodgy stuff will stay out of the courts - It will be considered a 'civil matter'

Link to post
Share on other sites
I spoke to a young professional chap this afternoon who informed me that he has purchased several properties over the past few years by applying for owner-occupier mortgages with different lenders. He buys the properties under the pretence of it being his main residence, then lets it out.

He has a friend who has purchased no less than 12 properties by this method. They are under the impression that lenders do not cross check for existing mortgages, as they are "in competition with each another". Frankly I am amazed if this is true. Surely it would show on a credit check?

He told me he was looking for another property to buy in London. I said prices were on the way down already, and he quoted the usual "prices never go down in the long run etc". I mentioned that yields are so low that you earn more in a savings account. He conceded that BTL these days is not about yield, it is a straight bet on capital appreciation.

It was an interesting insight into the mind of a BTLer. In investment terms, these people are what would be termed "risk lovers". They are prepared to take a chance as the potential returns, in their minds, are so great. They do not properly appraise the downside, unlike the "risk neutral" investor who is concerned about the most likely return.

This is why markets overshoot - people either do not care, or are to lazy to think about the potential downside. This attitude results in a small proportion of people succeeding beyond their wildest dreams, whilst most of them typically fail. Yes, its the same psychology you will find in casinos the world over.

Perhaps we need these people. Their risk taking often benefits mankind when they are taking a risk on something potentially useful - e.g. new technologies, pharmaceuticals etc. They willingly sacrifice themselves, and occasionally it benefits mankind.

Of course, BTL is not one of those useful ideas - just an also ran that will burn itself out.

Sounds like a made up story to me, but I can't resist saying something about it.

1. A credit check would usually show all of the mortgages, but a few banks don't supply info to the credit ref agencies. I have 1 mortgage myself that doesn't show on my credit ref.

2. The credit check doesn't say whether the mortgages are BTL or own home mortgages, just that they're owing.

3. The credit check would show that this person has moved home constantly.

4. The person could get better rates by taking proper BTL loans, unless they're taking short term offers on res mortgages which expire, in that case, they're in for a shock when they have trouble remortgaging off SVR's.

5. The story maye be actually that the person buys on a res mortgage, moves in & does work, then remortgages onto BTL mortgages & buys a new place. That would be a more normal method.

Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
  • Recently Browsing   0 members

    No registered users viewing this page.

  • 442 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.