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The Knimbies who say No

Buy To Let Figures From C M L

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Here's an article about BTL on the CML website:

Buy-to-let lending tops £5 billion in second quarter

08 Aug 13

Buy-to-let lending tops £5 billion in second quarter

Lenders advanced 40,000 mortgages, worth £5.1 billion, to buy-to-let investors in the second quarter of 2013, according to data published today by the CML. Both the number of buy-to-let loans, and the value of lending, were the highest since the third quarter of 2008.

Buy-to-let lending is continuing to recover strongly, but from a low base. The number of loans advanced in the second quarter was 19% higher by volume and 21% higher by value than in preceding three months (when lenders advanced 33,500 mortgages, worth £4.2 billion). Year-on-year, buy-to-let lending was 19% higher by volume and 31% higher by value (33,600 loans in the second quarter of 2012, worth £3.9 billion).

Lending for house purchase accounted for around half the loans advanced, and increased by 15% by volume and 19% by value over the preceding quarter. But the growth in remortgaging was stronger, with an increase over the same period of 24% by volume and 29% by value. This growth in remortaging partly reflects improved conditions in funding markets and more widespread availability of mortgage credit.

By the end of June, buy-to-let mortgages accounted for 13.3% of outstanding lending in the UK (up from 13.1% in the preceding quarter and 12.9% a year earlier). The number of outstanding mortgages totalled 1.48 million, worth £168.5 billion.

Buy-to-let mortgages in arrears of over three months accounted for 8.4% of the total, up slightly from 8.3% in the preceding quarter but down from 9.7% a year earlier. The possession rate, at 0.09%, was higher than the 0.07% in the wider mortgage market, but fell from 0.11% in the previous quarter.

Commenting on the data, the CML's head of policy Jackie Bennett said:

"Strong rental demand is contributing to the continuing expansion of the buy-to-let sector, but growth is also being helped by improved conditions in funding markets and more widespread availability of mortgages. These conditions are creating more opportunities for landlords to remortgage, as well as helping to fund increased activity in the mortgage market more generally. This spring, we have seen the highest levels of lending to first-time buyers since 2007, alongside the continuing recovery in the buy-to-let market."

Notes to editors

1. The Council of Mortgage Lenders' members are banks, building societies and other lenders who together undertake around 95% of all residential mortgage lending in the UK. There are 11.3 million mortgages in the UK, with loans worth over £1.2 trillion.

2. CML buy-to-let data for the third quarter of 2013 will be published on 14 November 2013.

3. The Ministry of Justice's Mortgage and landlord possession statistics Q2 2013 can be found on the Ministry of Justice website. This includes Quarterly National Statistics on possession claim actions in county courts by mortgage lenders and social and private landlords.

http://www.cml.org.uk/cml/media/press/3606

All roads lead to Nationwide perhaps on the BTL front. They have been aggressively expanding lending recently, and despite insisting to the contrary on their Twitter feed, are up to their necks in BTL via their subsidiary The Mortgage Works.

This Telegraph article fingers NW and Lloyds as the biggest BTL players, pushing some £3.4Bn net lending in the sector against a flat outlook elsewhere.

The net lending figures, which are buried in the CML's data, are more telling. These show the rate of growth of lending in the sector after capital repayments are taken into account, revealing the sector's real expansion.

Repayments for the latest quarter totalled £1.7bn, giving a net lending figure of £3.4bn. Net lending in the wider mortgage market is only just edging out of negative territory. The contrast shows how landlord lending has become an area of exceptional growth for lenders.

The biggest lenders to landlords continue to be Nationwide Building Society, Lloyds Banking Group (through its BM Solutions division) and a secondary tier of players including Coventry Building Society and Clydesdale Bank.

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/10230404/Buy-to-let-boom-powers-ahead-with-lending-up-31pc.html

Still, it shows that BTL is the only game in town insofar as net lending goes, and the one positive is that it ought to be bearish for rents.

Edited by cheeznbreed

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Here's an article about BTL on the CML website:

http://www.cml.org.u...edia/press/3606

All roads lead to Nationwide perhaps on the BTL front. They have been aggressively expanding lending recently, and despite insisting to the contrary on their Twitter feed, are up to their necks in BTL via their subsidiary The Mortgage Works.

This Telegraph article fingers NW and Lloyds as the biggest BTL players, pushing some £3.4Bn net lending in the sector against a flat outlook elsewhere.

http://www.telegraph...ng-up-31pc.html

Still, it shows that BTL is the only game in town insofar as net lending goes, and the one positive is that it ought to be bearish for rents.

The wording of the CML quote is interesting - it doesn't seem to differentiate between new lending and re-mortgaging clearly in the data that goes with it or do I need some coffee?

They talk about loans advanced but not the purpose...

"Strong rental demand is contributing to the continuing expansion of the buy-to-let sector, but growth is also being helped by improved conditions in funding markets and more widespread availability of mortgages. These conditions are creating more opportunities for landlords to remortgage, as well as helping to fund increased activity in the mortgage market more generally. This spring, we have seen the highest levels of lending to first-time buyers since 2007, alongside the continuing recovery in the buy-to-let market."
Edited by koala_bear

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The wording of the CML quote is interesting - it doesn't seem to differentiate between new lending and re-mortgaging clearly in the data that goes with it or do I need some coffee?

They talk about loans advanced but not the purpose...

The Telegraph article backs up the view that remortgaging is included in the BTL loans advanced figures, as I guess most LLs are on IO yet there were significant repayments made on the quarter.

So a third of BTL loan amounts advanced were apparently remortgages, if looking at the gross c.f. net lending levels. I guess mostly moving to NW, as with the BBA/BSA anomaly you have explained previously.

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I imagine yields will fall as prices up, rental supply up faster than demand. Though there was an article today on Uk population growth that is relevant . Well if they [the landlords] are happy taking 3% yield good luck to them and good luck to Nationwide!

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the one positive is that it ought to be bearish for rents.

I think it's hard to say what the effect is on rents. It depends what the would-be-FTB who gets blocked by a BTLer decides to do instead. If they live with family then no new household is formed and this is negative for rents. If they live in a shared house they end up forming 1/n (n = number of housemates) of a household which is probably less than the number of households they would have formed as an FTB so again this is negative for rents. If they end up renting a property of a similar size to the one they would have bought this is neutral for rents. I guess on aggregate more properties going into BTL hands is negative for rents overall but could have different effects on different property types (e.g. pushing up rents on houses suitable for conversion to HMOs, pushing down rents for traditional starter homes).

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I think it's hard to say what the effect is on rents. It depends what the would-be-FTB who gets blocked by a BTLer decides to do instead. If they live with family then no new household is formed and this is negative for rents. If they live in a shared house they end up forming 1/n (n = number of housemates) of a household which is probably less than the number of households they would have formed as an FTB so again this is negative for rents. If they end up renting a property of a similar size to the one they would have bought this is neutral for rents. I guess on aggregate more properties going into BTL hands is negative for rents overall but could have different effects on different property types (e.g. pushing up rents on houses suitable for conversion to HMOs, pushing down rents for traditional starter homes).

It removes the first rungs of the FTB ladder of course, and for BTL's there is no ladder. Landlords don't trade up.

Also renters I guess spend less money. Can't go down B&Q for wallpaper and paint because you are usually only allowed magnolia.

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I think it's hard to say what the effect is on rents. It depends what the would-be-FTB who gets blocked by a BTLer decides to do instead. If they live with family then no new household is formed and this is negative for rents. If they live in a shared house they end up forming 1/n (n = number of housemates) of a household which is probably less than the number of households they would have formed as an FTB so again this is negative for rents. If they end up renting a property of a similar size to the one they would have bought this is neutral for rents. I guess on aggregate more properties going into BTL hands is negative for rents overall but could have different effects on different property types (e.g. pushing up rents on houses suitable for conversion to HMOs, pushing down rents for traditional starter homes).

I think quite a few blocked FTBs who are desperate to buy are finding a route via Help to Buy. I wouldn't be surprised if rents in the short-medium term, say the next couple of years (eg once current ASTs come up for renewal and as HTB presumably continues to attract sales) start being put under increasing pressure, nationally.

Plus we have higher education institutions seemingly increasingly attempting to build their own accomodation, and other professional LLs wanting to enter BTL too. As you point out it all rests on more housing being built one way or another, but I think there are rooms for optimism on cheaper rents, as a slight silver lining to the overall housing policy cloud. Hardly a satisfactory situation of course, given cheaper rents are more of an unintended consequence than a desired outcome by policymakers. Of course, how Nationwide BS will fare if it's ramp in BTL lending dampens the rents that are backing the value of the asset secured by the loan, who can say..

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No HPC until BTL/multi home ownership is either curbed or discouraged. You can build all the houses you like, these nutters would just snap them up.

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Guardian says: 50% is remortgaging

http://www.theguardian.com/money/2013/aug/08/but-to-let-mortgages-highest

Lending for new purchases accounted for about half of the loans advanced, while the rest were remortgages by existing investors.It said lending was "continuing to recover strongly, but from a low base" and now accounted for 13.3% of outstanding lending in the UK, up from 13.1% in the preceding quarter and 12.9% a year earlier.

So this CML data suggests:

Remortgaging (churn) rate based on loan numbers: 17 years 5 months - this suggests that most BTLers are stuck on expensive deals because they can't move. Is the recent increase in lending just due to greater re-mortgaging?

(Probably next to none of them could move from '08-'13 so an extra 5 years).

The churn rate based on lending values is 16years 6 months which suggests a slight skew to those that have borrowed more re-mortgaging.

Average BTL mortgage: £113,850

Average NEW BTL mortgage / remortgage: £127,500

17% of renters rent from a BTL landlord

6% of properties have a BTL mortgage

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I think quite a few blocked FTBs who are desperate to buy are finding a route via Help to Buy. I wouldn't be surprised if rents in the short-medium term, say the next couple of years (eg once current ASTs come up for renewal and as HTB presumably continues to attract sales) start being put under increasing pressure, nationally.

Plus we have higher education institutions seemingly increasingly attempting to build their own accomodation, and other professional LLs wanting to enter BTL too. As you point out it all rests on more housing being built one way or another, but I think there are rooms for optimism on cheaper rents, as a slight silver lining to the overall housing policy cloud. Hardly a satisfactory situation of course, given cheaper rents are more of an unintended consequence than a desired outcome by policymakers. Of course, how Nationwide BS will fare if it's ramp in BTL lending dampens the rents that are backing the value of the asset secured by the loan, who can say..

You could make a good bit of money selling some of the stuff that the NW board are smoking ;)

Classic example from talking to a friend in the last couple of days.

2 of his colleagues set up a company and "buy" a BTL property with mortgage from Nationwide and rent it to a third colleague at a loss. The 2 of them are contractors and are using the BTL business to show they aren't fully employed by the firm they work full time for...

#good ir35 work around?

Edited by koala_bear

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You could make a good bit of money selling some of the stuff that the NW board are smoking ;)

Classic example from talking to a friend in the last couple of days.

2 of his colleagues set up a company and "buy" a BTL property with mortgage from Nationwide and rent it to a third colleague at a loss. The 2 of them are contractors and are using the BTL business to show they aren't fully employed by the firm they work full time for...

#good ir35 work around?

Duedil precis of accounts suggests that in financial year to 31/12/2012 The Mortgage Works (UK) PLC (the 100% owned BTL Nationwide subsidiary) posted pre-tax profits of £280m. Nationwide annual report shows group pre-tax profits of £304m for the same period.

In 2012 the Executive directors took £6,776,000 out of the company in terms of pay including pension benefits. Looking at it another way, if you strip out the FLS funded BTL short-term profit machine, you get left with profits of about £24m, which means that before the deduction of the remuneration expense, pretax profits were £30m, so Nationwide directors are helping themselves to £1 out of every £5 of pre-tax profits generated by the core business, (TMW was originally a Portman Building Society subsidiary that NW 'acquired' when it merged with Portman.)

Edited by ChairmanOfTheBored

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Page 14 of the Nationwide accounts, from the Business review discussion of net interest income.

The margin was supported in the year by strong new business asset margins, including the significant positive impact of deal maturities that re-price as customers either revert to BMR or our Standard Mortgage Rate or opt to take a new mortgage product. This has been broadly offset by the increased cost of both liquidity, following full repayment of special liquidity scheme (SLS) balances, and funding as a result of a competitive savings market that has been exacerbated by challenges within the wholesale funding market due principally to uncertainty relating to the ongoing Eurozone crisis. Nationwide’s BMR promise represents a significant distribution of value to our members in line with our mutual principles. However, this distribution of member value continues to be a significant factor contributing to margin compression, with balances in excess of £50 billion capped at 2 percentage points above base rate, which we estimate is having around a £750 million (0.38%) adverse impact on Group margin, by reference to SVRs available elsewhere in the market. We do not expect total BMR balances to grow significantly beyond their current level and forecasts indicate they will decline steadily from the middle of 2013 onwards.

BTL?

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Duedil precis of accounts suggests that in financial year to 31/12/2012 The Mortgage Works (UK) PLC (the 100% owned BTL Nationwide subsidiary) posted pre-tax profits of £280m. Nationwide annual report shows group pre-tax profits of £304m for the same period.

In 2012 the Executive directors took £6,776,000 out of the company in terms of pay including pension benefits. Looking at it another way, if you strip out the FLS funded BTL short-term profit machine, you get left with profits of about £24m, which means that before the deduction of the remuneration expense, pretax profits were £30m, so Nationwide directors are helping themselves to £1 out of every £5 of pre-tax profits generated by the core business, (TMW was originally a Portman Building Society subsidiary that NW 'acquired' when it merged with Portman.)

Why bother lending to owner occupiers?:blink:

(Don't bother answering we both know the answer)

I think this say more about the scale of the ~400,000 loss making OO mortgages that NW still have on their books. (that no one is going to move from given what Carney said yesterday for another 4 years)

HTB = help to bail (-out NW)?

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We do not expect total BMR balances to grow significantly beyond their current level and forecasts indicate they will decline steadily from the middle of 2013 onwards.

What the hell are they going to offer to get people to move from BMR deals for the next 4 years? So I suspect decline steadily = matches divorce rate?

(I assume the deal isn't portable so divorce rate + moving house rate?)

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Comparative CML figures (Jun 2007 figures in brackets):

Number of BTL mortgages outstanding: 1,480,000 (938,500)

Value of BTL mortgages outstanding: £168.5 billion (£108 billion).

BTL as proportion of total outstanding mortgage market: 13.3% (10.0%)

Proportion of BTL mortgages in >3 months arrears: 8.4% (0.63%)

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Comparative CML figures (Jun 2007 figures in brackets):

Number of BTL mortgages outstanding: 1,480,000 (938,500)

Value of BTL mortgages outstanding: £168.5 billion (£108 billion).

BTL as proportion of total outstanding mortgage market: 13.3% (10.0%)

Proportion of BTL mortgages in >3 months arrears: 8.4% (0.63%)

Edit question mark over arrears data.

Edited by cheeznbreed

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The 2 of them are contractors and are using the BTL business to show they aren't fully employed by the firm they work full time for...

#good ir35 work around?

Makes no odds for IR35 - HMRC would classify it as a different line of business and so it would not help their case at all.

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Telling stats, thanks.

So significant arrears were present in a small ~5,900 loans in June 2007. This has risen to 124,320 today. Quite a large increase to put it mildly, a factor of 20 or so.

To put it another way, if the same 5,900 arrears in 2007 are in arrears today, and no more 2007 loans are in arrears, then approximately 22% of new BTL lending since then is in arrears. It won't be like that of course(I suspect a lot of stuff written in 2005-2008 is well in arrears) but it serves to show the scale of the issue for some BTLers.

I am just reading the Nationwide interim financials. It's the same there with loans in the non residential significantly higher in the 3 month arrears category.

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Comparative CML figures (Jun 2007 figures in brackets):

Number of BTL mortgages outstanding: 1,480,000 (938,500)

Value of BTL mortgages outstanding: £168.5 billion (£108 billion).

BTL as proportion of total outstanding mortgage market: 13.3% (10.0%)

Proportion of BTL mortgages in >3 months arrears: 8.4% (0.63%)

The arrears rate is particularly impressive when you consider how accomodating BoE monetary policy has been.

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The arrears rate is particularly impressive when you consider how accomodating BoE monetary policy has been.

  • The irrational exuberance of people buying assets in an asset class that ALWAYS GOES UP is one thing (especially if they are spending borrowed money).

  • Irrational exuberance on the part of people paying rents out of income and bankrupt governments paying housing benefits out of a weakening tax base is another.

IMO the former exists and the latter doesn't.

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