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okaycuckoo

Banks As Landlords

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Had a conversation today with a lawyer. It's a bit of a stretch, but it makes me wonder about the received wisdom that banks don't want to be in any business except the lending business.

The lawyer worked for a rail franchise in the '90s, then spent time in Hong Kong, and returned to England, where he's slow peddling toward retirement.

He says all the rail stock in the UK is owned by the banks. Wot? Yeah, they bought it all up a few years after privatisation. Big profits. The franchises lease the stock, either with or without maintenance clauses, but can only do so on short term contracts because of the reduced durations of their franchises, which means the banks charge a stonking premium. He went into a few details about pre-privatisation stock being used as a scam.

I suppose something similar goes for finance houses that own all those hire-purchase vehicles out there - the bank is the ultimate legal owner of each car and van.

I was wondering if some sort of vertical integration model for the residential housing market might be on their minds. They own alot of repo'd stock, and have millions of borrowers by the balls. With government support, might they find new cash flow from the rental business while retaining ownership?

Up to now, outside of BTL lenders have refused to permit tenants after the mortgage is signed - they've been stung in the past by not inquiring about the mad grannie in the attic, and don't want unknowable rights of residence to queer their prospect of sale. But everyone knows that many mortgagors have stuffed their houses with paying lodgers to make the mortgage bills, and if banks really didn't want that they'd step in toot sweet to make sure they don't have their own interests impaired. Plus the government has made new law to help unauthorised tenants buy time from eviction, so the lender can accept their rent without accepting the tenancy - but if the cash flow is there, will a lender really step in and evict the tenant? After a while, won't it all become too cosy to end?

Not conclusive, but I wonder if this is how the wind is blowing.

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Had a conversation today with a lawyer. It's a bit of a stretch, but it makes me wonder about the received wisdom that banks don't want to be in any business except the lending business.

The lawyer worked for a rail franchise in the '90s, then spent time in Hong Kong, and returned to England, where he's slow peddling toward retirement.

He says all the rail stock in the UK is owned by the banks. Wot? Yeah, they bought it all up a few years after privatisation. Big profits. The franchises lease the stock, either with or without maintenance clauses, but can only do so on short term contracts because of the reduced durations of their franchises, which means the banks charge a stonking premium. He went into a few details about pre-privatisation stock being used as a scam.

this is quite well known - the banks got into rail vehicle leasing, big-ticket items, VERY big ticket items, no-one else could possibly raise the funds at sufficiently low cost

I suppose something similar goes for finance houses that own all those hire-purchase vehicles out there - the bank is the ultimate legal owner of each car and van.

not really, in this case the cars are security for the loan

I was wondering if some sort of vertical integration model for the residential housing market might be on their minds. They own alot of repo'd stock, and have millions of borrowers by the balls. With government support, might they find new cash flow from the rental business while retaining ownership?

perhaps - if the yields weren't awful

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Is the cash flow there? I don't think they'll do this. Banks need to make 15%+. On the other hand, the banks, central banks and the government are currently one and the same.

Had a conversation today with a lawyer. It's a bit of a stretch, but it makes me wonder about the received wisdom that banks don't want to be in any business except the lending business.

The lawyer worked for a rail franchise in the '90s, then spent time in Hong Kong, and returned to England, where he's slow peddling toward retirement.

He says all the rail stock in the UK is owned by the banks. Wot? Yeah, they bought it all up a few years after privatisation. Big profits. The franchises lease the stock, either with or without maintenance clauses, but can only do so on short term contracts because of the reduced durations of their franchises, which means the banks charge a stonking premium. He went into a few details about pre-privatisation stock being used as a scam.

I suppose something similar goes for finance houses that own all those hire-purchase vehicles out there - the bank is the ultimate legal owner of each car and van.

I was wondering if some sort of vertical integration model for the residential housing market might be on their minds. They own alot of repo'd stock, and have millions of borrowers by the balls. With government support, might they find new cash flow from the rental business while retaining ownership?

Up to now, outside of BTL lenders have refused to permit tenants after the mortgage is signed - they've been stung in the past by not inquiring about the mad grannie in the attic, and don't want unknowable rights of residence to queer their prospect of sale. But everyone knows that many mortgagors have stuffed their houses with paying lodgers to make the mortgage bills, and if banks really didn't want that they'd step in toot sweet to make sure they don't have their own interests impaired. Plus the government has made new law to help unauthorised tenants buy time from eviction, so the lender can accept their rent without accepting the tenancy - but if the cash flow is there, will a lender really step in and evict the tenant? After a while, won't it all become too cosy to end?

Not conclusive, but I wonder if this is how the wind is blowing.

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  • 140 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%



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