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Landlord ‘king’ Sells Before Rate Rise ‘slaughter’

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http://www.bloomberg.com/apps/news?pid=206...id=aetYJuhH_GsY

Landlord ‘King’ Sells Before Rate Rise ‘Slaughter’ (Update1)

By Kevin Crowley

Sept. 25 (Bloomberg) -- Fergus Wilson, the former mathematics teacher dubbed Britain’s buy-to-let “King,†says he’s selling 700 rental properties before interest rate rises bring “slaughter†to landlords in the U.K. housing market.

Wilson, who together with his wife Judith rank among the 1,000 wealthiest Britons according to this year’s Sunday Times Rich List, said it was inevitable that interest rates would rise from a historic low, pummeling rental landlords.

“You’ve got a lot of people who have taken out a mortgage and are right up to their throats†in debt, said Wilson as he settled into a black armchair at a hotel in Maidstone, south- eastern England. “As soon as rates go up, they’re going to be slaughtered.â€

Rates are forecast to rise, hurting buy-to-let landlords in particular because they pay more than other mortgage borrowers. The Bank of England base rate, a benchmark for British mortgages, will reach 1.25 percent by the end of next year from its current 0.5 percent, according to economist estimates compiled by Bloomberg. Most landlord loans are already much more costly, at 4 percent or higher, according to personal finance Web site Moneyfacts.co.uk. The U.K. has about 1.2 million buy- to-let loans, 11 percent of the total.

“There are a huge number of people very sensitive to interest-rate rises, both in buy-to-let and owner-occupied mortgages,†said David Watts, a London-based analyst at CreditSights Inc.

‘Teaser’ Rates End

The Wilsons bought most of their property empire in the decade to 2007, purchasing houses with two or three bedrooms using interest-only mortgages. At their acquisitive peak, they purchased a house a day in Ashford, a commuter town in the south-eastern county of Kent that boomed after the opening of the London-to-Paris high-speed rail link.

The former teachers used rental income to cover mortgage payments and when house prices rose they used the equity gained to fund more purchases.

That model has now changed, with many lenders leaving the buy-to-let market altogether and others pushing interest rates substantially higher than the Bank of England base rate, said Ed Stansfield, chief property economist at Capital Economics Ltd., the London-based economics consultancy. In addition, many buy- to- let “teaser†rates are now resetting at higher levels, he said. Any rise will particularly hurt the 60 percent of buy-to- let investors owning fewer than four properties, Stansfield added.

‘King and Queen’

The Wilsons, called “The King and Queen of Buy-to-Let†by newspapers including the Guardian, last week agreed to sell their investment for 180 million pounds ($289 million) to an asset management company “possibly representing Russians,†Wilson said. He would not identify the potential buyer, citing a confidentiality agreement. The pair stand to make a 90 million- pound profit after taxes and expenses incurred in the sale, he added.

Buy-to-let, also known as landlord loans, grew in popularity in the decade to 2007, as property prices tripled and banks flooded the economy with cheap credit. Lenders such as Bradford & Bingley Plc and WestLB AG’s Basinghall Finance unit offered interest-only mortgages to new landlords. Last year, Bradford & Bingley, the U.K.’s biggest buy-to-let lender, was nationalized and WestLB received a German government bailout. Basinghall Finance is closed to new business, according to Matt Smith, a company spokesman.

‘Enormous Problem’

While mortgages more than three months in arrears rose to a 12-year high of 2.43 percent on June 30, according to Council of Mortgage Lenders figures, Bradford & Bingley says its rate is more than double, at 5.88 percent. British house prices have declined 19 percent from the August 2007 peak, according to a house price index produced by Halifax, part of Lloyds Banking Group Plc.

The U.S. may also face problems in any housing market recovery. About 7 million properties that are likely to be seized by lenders have yet to hit the market, Amherst Securities Group LP analysts said Sept. 23.

“There’s an awful lot of people who have avoided going into arrears simply because interest rates have been so low,†said Stansfield of Capital Economics, who expects property prices to fall as much as 40 percent from the 2007 peak. “Anyone looking to refinance a buy-to-let mortgage is going to have an enormous problem because lending standards have been tightened more than for any other type of mortgage.â€

‘No Better Time to Sell’

The number of buy-to-let mortgage products available to borrowers plunged by 94 percent to 209 as of Sept. 24, from 3,662 at the end of August 2007, according to Moneyfacts.

Buy-to-let borrowers are “more susceptible†to any rise in interest rates because they may not be able to raise rents to cover rising mortgage payments when tenants are threatened by stagnant incomes and rising unemployment, CreditSights’ Watts said.

“When you’ve got low rates, there’s only one way they can go, and that’s up,†Wilson said. “There’s no better time to sell.â€

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This has a certain smell to it. He hasn't actually sold it yet.

King: "Yippee, I'm selling and the market's about to tank. Aren't I clever..and rich, rich I tell you! Look, I'm in the newspaper!"

Investor: "Thanks for letting us know, we are now pulling out of this deal."

There really must be more to this.

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"At their acquisitive peak, they purchased a house a day in Ashford, a commuter town in the south-eastern county of Kent that boomed after the opening of the London-to-Paris high-speed rail link."

I grew up near Ashford. It has a rail link to London but was never a "commuter town" and it hardly "boomed" after the Eurostar station opened it just rose in value along with the rest of the country.

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:D:D

Watch out; he'll sue you!

Let's face it, with 700 homes to unload onto the market, it is going to be extremely difficult to find buyers. The best he can hope for, is for some dumb mutha to buy the lot in one hit. But exactly how much they will make, minus all the liabilities, is anyone's guess.

Seeing the state of some of his own declarations about the value of his mortgages & their (the properties) current market value that he perceives to be correct, I'm not convinced it'll be anywhere near £90 mill. It seems that he will be in the sh1t if rates goes up, if he isn't already struggling.

*edit for dodgy spelling, grammar etc. Probably isn't much better....... :lol:

Edited by maffo in oxford

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hang on, he bought all these on BTL when rates were 5% or so. So tell me, apart making money since rates dropped, what will the difference be when rates go back to 5% but the houses are worth less than he remortgaged and MEW'd a lot of them.

He's not thought this one through has he - he's clearly got some cash flow issues as I bet a significant number of his houses are now up for renewal and the remortgage valuations he's getting are scaring him and he does not have (or want to put in) the required cash..... being Britain's worst racehorse owner is an expensive habit you know....

imagine any other poor sod trying to sell in Ashford now - unless he does a discount job lot deal to some lunatic (or they are smart enough not to pay anywhere near market, let alone his valuations) then the market will be saturated and selling 700 houses will take him years.....

Edited by Rachman

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Let's face it, with 700 homes to unload onto the market, it is going to be extremely difficult to find buyers. The best he can hope for, is for some dumb mutha to buy the lot in one hit. But exactly how much they will make, minus all the liabilities, is anyone's guess.

Seeing the state of some of his own declarations about the value of his mortgages & their (the properties) current market value that he perceives to be correct, I'm not convinced it'll be anywhere near £90 mill. It seems that he will be in the sh1t if rates goes up, if he isn't already struggling.

*edit for dodgy spelling, grammar etc. Probably isn't much better....... :lol:

He said:

last week agreed to sell their investment for 180 million pounds ($289 million) to an asset management company “possibly representing Russians,†Wilson said. He would not identify the potential buyer, citing a confidentiality agreement.

Which would say, pretty categorically, they have a buyer at an agreed price :blink:

He then went on to say:

“You’ve got a lot of people who have taken out a mortgage and are right up to their throats†in debt, said Wilson as he settled into a black armchair at a hotel in Maidstone, south- eastern England. “As soon as rates go up, they’re going to be slaughtered.â€

Which is a pretty stupid thing to say before you have actually completed

Time will tell, but methinks I smell ******** or money laundering... <_<

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here we see the future assault victim telegraphing the killer punch, on behalf of any future pugilist who's listening

what a genius

Toad

Kent385_608634a.jpg

Fergus

toad_of_toad_hall.jpg

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He's not thought this one through has he

I thought he was on the record for saying that property values double every 7 years. I expect that was without factoring wage inflation into his calculations, and wages (hence a fundamental on which someone can get mortgage) look extremely unlikely to rise in the next 7 years.

It seems he's another one that neglected rental yield in view of capital gains, without understanding what actually drove those capital gains (credit getting cheaper, rather than wages going up).

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He's selling 700 houses for £180 million, or £257k each, which seems above average for 3-bed semis in Ashford (I could be wrong but just had a quick look at Rightmove as I don't know the area at all?). Especially as the "investors" would probably want a bulk discount?

What you are saying sounds perfectly logical to me but the article pretty much says he has SSTC

Time will tell.... <_<

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He said: Which would say, pretty categorically, they have a buyer at an agreed price :blink: He then went on to say: Which is a pretty stupid thing to say before you have actually completed Time will tell, but methinks I smell ******** or money laundering... <_<

It seems a very public sale to be money laundering.

If it is, there will be many here glad to see him behind bars.

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He's selling 700 houses for £180 million, or £257k each, which seems above average for 3-bed semis in Ashford (I could be wrong but just had a quick look at Rightmove as I don't know the area at all?). Especially as the "investors" would probably want a bulk discount?

Is your rightmove stuck in 2007 mode? :D

http://www.rightmove.co.uk/property-for-sa...ertyType=houses

Lots of semi's for sale at £175K here.

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What you are saying sounds perfectly logical to me but the article pretty much says he has SSTC

Time will tell.... <_<

I have a wonderful possibility for you, that I think you'd dearly wish to be true.

They have 700 mortgages - they are linked. They have been constantly under review and renewal. Margin calls have come in - which were originally resisted as the Wilsons could practically do because of their 'size'.

They have reached a position where the bank has said, get rid or we'll pull them - and cross defaults would mean the domino rally starts. BTW, we have a prepack buyer waiting for them - take it or else....

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700 houses sold for £180m. So average selling price of £257k.

I didn't realise 2 and 3 bedders in ashford were so expensive...

They're not by the looks of things.

700 extra on the market won't exactly help the supply/demand argument either!

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They're not by the looks of things.

700 extra on the market won't exactly help the supply/demand argument either!

So if the true value of his portfolio is closer to 110 mill. thats already 70 mill. knocked off his perceived profit??

One can live in hope anyway

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I have a wonderful possibility for you, that I think you'd dearly wish to be true.

They have 700 mortgages - they are linked. They have been constantly under review and renewal. Margin calls have come in - which were originally resisted as the Wilsons could practically do because of their 'size'.

They have reached a position where the bank has said, get rid or we'll pull them - and cross defaults would mean the domino rally starts. BTW, we have a prepack buyer waiting for them - take it or else....

I dont think thats the case though, one of the other posters had actually bothered to look into this (rare, huh? ;) ) and they seem to own the houses in their own name - so it would be hard to get a corporate loan? :unsure:

I would expect their major lenders (who are probably owned by HMG or Santander) to be nervous about their exposure to the Wilsons tho... <_<

Maybe the Wilson's have just woken up and smelled the coffee - two years too late? :o

(But yes, you are right, I have raised that in the past as a possibility, the facts as presented by others have led me to now believe thats less likely)

{Edit: typhos)

Edited by Neverland

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I dont think thats the case though, one of the other posters had actually bothered to look into this (rare, huh? ;) ) and they seem to own the houses in their own name - so it would be hard to get a corporate loan? :unsure:

I would expect their major lenders (who are probably owned owned by HMG or Santander) to be nervous about their exposure to the Wilsons tho... <_<

Maybe the Wilson's have just woken up and smelled the coffee - two years too late? :o

(But yes, you are right, I have raised that in the past as a possibility, the facts as presented by others have led me to now believe thats less likely)

it's not that tough to get a corporate loan - it's just a loan to the Wilsons and backed by assets (the houses). They will lend to companies and individuals alike, usually. HOwever, I do agree they've been talking about individual loans and individusal houses - if I were their bank and I wanted their bulk business, I'd insist on an underlying guarantee and covenant that they would not default on some etc... - it would be a private document and so not on a Registry, but I'd be astounded if it was not negotiated and signed between lender and borrower (the Wilsons).

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Many good points in the above. And a load of envious tripe too.

If he's sold them for a penny more than his equity then he's done well - they've taken shed loads of cash out of the business already.

To a European buyer, the pound having dropped one third over the last 18 months against the Euro (he won't be paying roubles, will he?) and Ashford prices dropping maybe 20%, the buyer is getting his houses for half the 2007 price. There's a 50% HPC.

Meanwhile the Wilsons get their cash, and get to retire. All credit to them for calling the market right. Agree £250k average seems rather high, but allowing for hyperbole he seems to have got out with his hands clean. Well done them.

Finally, if you owe the bank £1m it's your problem, owe them 250m it's their problem... the last thing the banks would want to do would be margin calls - the Ashford market would tank totally.

Edited by Telometer

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