Jump to content
House Price Crash Forum
Sign in to follow this  
Dave Beans

Btl Landlords "more Susceptible" To Interest Rate Rises

Recommended Posts

http://www.dailymail.co.uk/news/article-3146648/Buy-let-boom-threaten-economy-time-landlords-taking-debt-vulnerable-rates-rise.html

It warned they could find their investments become ‘unprofitable’ if the money they earn in rent no longer covers their mortgage repayments. If this triggered a rush to sell it would damage the entire housing market – dragging down house prices.

Oh dear, what a shame...

Edited by Dave Beans

Share this post


Link to post
Share on other sites

That's the risk one takes when one buys a property to rent out with a mortgage! Don't tell me that these fools were not warned.

I say stop all mortgages on BTL property. Not that it will happen with all those MPs with BTL portfolios.

Share this post


Link to post
Share on other sites

That's the risk one takes when one buys a property to rent out with a mortgage! Don't tell me that these fools were not warned.

I say stop all mortgages on BTL property. Not that it will happen with all those MPs with BTL portfolios.

Well, they were not. And most a too stupid/brain-washed to calculate the risk.

Borrowing money to rent a house is significantly riskier than borrowing money to invest in the stockmarket.

The IR rate on BT *still* does not reflect the risks that banks are taking on.

Some seem to have a handle on the risk, or that the non-performance on their LL loans are screaming at the bank, sothey have canned BTL loans.

Share this post


Link to post
Share on other sites

I really can't see what the risk is, they've been paying off the principle for years. It's not like BTL has lots of idiots who just took out IO mortgages.....

Or who have 80% of their wealth concentrated in one asset class. And are mortgaged out on the OOO + BTLs.

BTL when you still have a OO mortgage and have less than £1m in liquid assets is fkcing insane.

People just cannot see it. You're mad I tell them FFS!

Share this post


Link to post
Share on other sites

Well, they were not. And most a too stupid/brain-washed to calculate the risk.

Warned? That's like putting silly signs next to hot taps warning of hot water.

Share this post


Link to post
Share on other sites

maybe the lenders honestly believe that capping the LTV for BTL to 85% when the LTV for OO is 95% is a fair representation of the different risk associated with each type of mortgage

lenders have enough bright people and enough computing power to make an assessment of the risk

an assessment that is made easier, of course, by the tacit agreement of the state to bail most of them out if it they got it wrong and they look like going skint

similarly for BTL investors: if they are capable of filling in the application form then they are capable of working out the various scenarios around income, outgoings and capital appreciation / depreciation

if either party gets their sums wrong, or their worst case scenario wasn't bad enough to reflect a particular reality, then that should be hard luck

to follow the share portfolio analogy for a moment... how many people with, say, £100k to invest, would put it into a single company's shares rather than spread the risk over a portfolio of a few shares or an index? None is the answer. How many people with, say £100k to invest, would borrow some more money to invest in anything other than property? None is the answer.

So, anyone taking a decision to invest all their money into a single BTL property, or to borrow more money to invest in BTL is, imo, making a conscious and informed decision to accept more risk in their quest for more return. If that pays off, brilliant, I am pleased for them. If that causes them to lose everything they have risked (including the money they borrowed), hey ho, that is the way it can go sometimes.

Share this post


Link to post
Share on other sites

So, anyone taking a decision to invest all their money into a single BTL property, or to borrow more money to invest in BTL is, imo, making a conscious and informed decision to accept more risk in their quest for more return. If that pays off, brilliant, I am pleased for them. If that causes them to lose everything they have risked (including the money they borrowed), hey ho, that is the way it can go sometimes.

I'm not pleased with them if it pays off or not. Investing in a business enables the business to do more (hopefully). "Investing" in BTL just puts pressure on the housing supply. If you want to actually invest in houses buy shares in a building firm.

Share this post


Link to post
Share on other sites

Or who have 80% of their wealth concentrated in one asset class. And are mortgaged out on the OOO + BTLs.

BTL when you still have a OO mortgage and have less than £1m in liquid assets is fkcing insane.

People just cannot see it. You're mad I tell them FFS!

This ^....buy outright to let without debt, not a problem......it is the large percentage of highly leverage debt to capital that is the growing timebomb.......also prospective rents are vastly over exaggerated imo to help make something unviable look viable, very greek......wait until the two year fixed rates IO expire......

Share this post


Link to post
Share on other sites

maybe the lenders honestly believe that capping the LTV for BTL to 85% when the LTV for OO is 95% is a fair representation of the different risk associated with each type of mortgage

lenders have enough bright people and enough computing power to make an assessment of the risk

an assessment that is made easier, of course, by the tacit agreement of the state to bail most of them out if it they got it wrong and they look like going skint

....

Please stop; my sides hurt.

Would these be the banks who are in various stages of administration/propper up by the government.

Banks *may* have some smart people - I've not seen a lot of evidence over the last 30 years.

Whether they listen to them is another thing.

As my mum said: 'Im sure the bank won't lend your brother he cannot afford to pay back.'

This was the same BS who'd lent 1.5m in BTL mortgages to someone on the dole.

Share this post


Link to post
Share on other sites

there is one other thing that I have seen in BTLers calculations that makes me scratch my head - using the 'profit' from the rent after paying the mortgage as 'wages'

particularly if the mortgage is IO and especially with an expectation that at some point before the debt is fully repaid or the property sold, interest rates might rise

An example (that without naming any names, is real)

Purchased a ~£150k property (including stamp duty and fees it is a only few pounds over £150k) with £100k IO mortgage over 15 years at base +2.29% (HSBC Lifetime tracker premier buy to let - still available now)

mortgage payment £233 per month

Rent £595 per month

Agents fees 9%+VAT = £64.26 per month

Insurance = £10 per month

'Profit' = £287.74 per month

save for 40% tax £115.09 (at least she does this bit)

'wages' = £172.65 per month ('enough for a little treat every month')

So, no consideration for voids, non payers, repairs, fees, repayment of the loan principle, interest rate rises, captial depreciation, lower rents

No matter how hard various people have tried to have such variables brought into her sums, it just doesn't register. This is a bright girl, with maths A level, a good science degree and an MBA with a job in a big plc earning around £85k. Her own house has a tracker repayment mortgage at about 40% LTV with 12 years left to run.

Share this post


Link to post
Share on other sites

I can hear the sound of thousands of unsolicited text messages being prepared .."have you been mis-sold a buy to let mortgage...claim now under the Governments new Compensation for BTL investors scheme...you could be entitled to thousands !!!!!!!!

Share this post


Link to post
Share on other sites

Please stop; my sides hurt.

Would these be the banks who are in various stages of administration/propper up by the government.

Banks *may* have some smart people - I've not seen a lot of evidence over the last 30 years.

Whether they listen to them is another thing.

As my mum said: 'Im sure the bank won't lend your brother he cannot afford to pay back.'

This was the same BS who'd lent 1.5m in BTL mortgages to someone on the dole.

The banks do have the ability to calculate the risks. What they do with the answer to those calculations is another thing - as there has been ample evidence of, including such things as you mention.

In the normal course of events, that would be OK. The bank would go skint, the excessive borrowers would go skint, the market price for the assets purchased on leverage would correct and lessons would be learnt.

The government has, however, knackered the market mechanism up by bailing out most lenders who got it wrong (we can make an argument that they deliberately got it wrong in the chase for higher returns, knowing that the government would bail them).

The banks now may as well lend as much as they can to as many borrowers as they can within the rules set out by the government, with no calculation of the risk at all. As I mentioned on the Nationwide thread, maybe there is evidence that this might be what is going on out there just now.

If the government bails banks again... the banks will have been proved right... again!

Share this post


Link to post
Share on other sites

there is one other thing that I have seen in BTLers calculations that makes me scratch my head - using the 'profit' from the rent after paying the mortgage as 'wages'

particularly if the mortgage is IO and especially with an expectation that at some point before the debt is fully repaid or the property sold, interest rates might rise

An example (that without naming any names, is real)

Purchased a ~£150k property (including stamp duty and fees it is a only few pounds over £150k) with £100k IO mortgage over 15 years at base +2.29% (HSBC Lifetime tracker premier buy to let - still available now)

mortgage payment £233 per month

Rent £595 per month

Agents fees 9%+VAT = £64.26 per month

Insurance = £10 per month

'Profit' = £287.74 per month

save for 40% tax £115.09 (at least she does this bit)

'wages' = £172.65 per month ('enough for a little treat every month')

So, no consideration for voids, non payers, repairs, fees, repayment of the loan principle, interest rate rises, captial depreciation, lower rents

No matter how hard various people have tried to have such variables brought into her sums, it just doesn't register. This is a bright girl, with maths A level, a good science degree and an MBA with a job in a big plc earning around £85k. Her own house has a tracker repayment mortgage at about 40% LTV with 12 years left to run.

the secret is to show the bottom line gross figure in RED and double underline it.

Then you will see the light.

Share this post


Link to post
Share on other sites

there is one other thing that I have seen in BTLers calculations that makes me scratch my head - using the 'profit' from the rent after paying the mortgage as 'wages'

particularly if the mortgage is IO and especially with an expectation that at some point before the debt is fully repaid or the property sold, interest rates might rise

An example (that without naming any names, is real)

Purchased a ~£150k property (including stamp duty and fees it is a only few pounds over £150k) with £100k IO mortgage over 15 years at base +2.29% (HSBC Lifetime tracker premier buy to let - still available now)

mortgage payment £233 per month

Rent £595 per month

Agents fees 9%+VAT = £64.26 per month

Insurance = £10 per month

'Profit' = £287.74 per month

save for 40% tax £115.09 (at least she does this bit)

'wages' = £172.65 per month ('enough for a little treat every month')

So, no consideration for voids, non payers, repairs, fees, repayment of the loan principle, interest rate rises, captial depreciation, lower rents

No matter how hard various people have tried to have such variables brought into her sums, it just doesn't register. This is a bright girl, with maths A level, a good science degree and an MBA with a job in a big plc earning around £85k. Her own house has a tracker repayment mortgage at about 40% LTV with 12 years left to run.

Corporate jobs seen to be preconditioned on you being a hamster on the housing hamster wheel, btl is even better. The btl is another status symbol to go with the Audi.

Share this post


Link to post
Share on other sites

Please stop; my sides hurt.

Would these be the banks who are in various stages of administration/propper up by the government.

Banks *may* have some smart people - I've not seen a lot of evidence over the last 30 years.

Whether they listen to them is another thing.

As my mum said: 'Im sure the bank won't lend your brother he cannot afford to pay back.'

This was the same BS who'd lent 1.5m in BTL mortgages to someone on the dole.

+1

Another poster has pointed out general incompetence that exists in most corporate jobs these days. I think banks are one major holder of this. I bet the staff tend to have btls themselves. Actually I knew some who did so yes they do

Edited by Si1

Share this post


Link to post
Share on other sites

mortgage payment £233 per month

Rent £595 per month

Agents fees 9%+VAT = £64.26 per month

Insurance = £10 per month

'Profit' = £287.74 per month

save for 40% tax £115.09 (at least she does this bit)

'wages' = £172.65 per month ('enough for a little treat every month')

So, no consideration for voids, non payers, repairs, fees, repayment of the loan principle, interest rate rises, captial depreciation, lower rents

No matter how hard various people have tried to have such variables brought into her sums, it just doesn't register. This is a bright girl, with maths A level, a good science degree and an MBA with a job in a big plc earning around £85k. Her own house has a tracker repayment mortgage at about 40% LTV with 12 years left to run.

My view is that you should be saving around £100 a month to cover repairs. No need ton consider rents going down, like house prices they always go up....

BTL the "real" profit is the house going up in value, think what a house cost in 1980 to what it costs now.. just think of the profit you are going to make over 30 years.....

Share this post


Link to post
Share on other sites

there is one other thing that I have seen in BTLers calculations that makes me scratch my head - using the 'profit' from the rent after paying the mortgage as 'wages'

particularly if the mortgage is IO and especially with an expectation that at some point before the debt is fully repaid or the property sold, interest rates might rise

An example (that without naming any names, is real)

Purchased a ~£150k property (including stamp duty and fees it is a only few pounds over £150k) with £100k IO mortgage over 15 years at base +2.29% (HSBC Lifetime tracker premier buy to let - still available now)

mortgage payment £233 per month

Rent £595 per month

Agents fees 9%+VAT = £64.26 per month

Insurance = £10 per month

'Profit' = £287.74 per month

save for 40% tax £115.09 (at least she does this bit)

'wages' = £172.65 per month ('enough for a little treat every month')

So, no consideration for voids, non payers, repairs, fees, repayment of the loan principle, interest rate rises, captial depreciation, lower rents

No matter how hard various people have tried to have such variables brought into her sums, it just doesn't register. This is a bright girl, with maths A level, a good science degree and an MBA with a job in a big plc earning around £85k. Her own house has a tracker repayment mortgage at about 40% LTV with 12 years left to run.

She's in it for capital gain, nothing else. Has swallowed the "houses only ever go up" mantra and hopes prices double every 7-10 yrs like she's seen with her parents home.

I've lots of family members in the BTL game. ALL require rising house prices to make it work. The margins on monthly rents are tiny.

Share this post


Link to post
Share on other sites

She's in it for capital gain, nothing else. Has swallowed the "houses only ever go up" mantra and hopes prices double every 7-10 yrs like she's seen with her parents home.

I've lots of family members in the BTL game. ALL require rising house prices to make it work. The margins on monthly rents are tiny.

The question is whether, when they are actually having to write a cheque every month to stay in the BTL game, they will be prepared to wait for those "gains".

At the moment it's a no cost bet.

Share this post


Link to post
Share on other sites

I could see the sense in leveraged BTL with a repayment mortgage where the rent covered all the costs + contingency + profit

That way, with a £150k house bought with a £50k deposit where the £100k is repaid by the repayment element of the mortgage, tenants are - basically - giving you £100k over the life of the mortgage

But to not have any intention of repaying the debt and relying on HPI to do the heavy lifting... well, as killer bunny has pointed out in the nationwide thread, there are plenty of parts of the UK where compound house price growth is <1% per annum over a ten year period

Share this post


Link to post
Share on other sites

She's in it for capital gain, nothing else. Has swallowed the "houses only ever go up" mantra and hopes prices double every 7-10 yrs like she's seen with her parents home.

I've lots of family members in the BTL game. ALL require rising house prices to make it work. The margins on monthly rents are tiny.

100% correct. I used to work with BTLs and capital gain is the aim. So this person's aim is probably in 15 years to sell if for £300K and make £150K profit (I doubt capital gains tax will be calculated) and make £150k for little work.

I think there could be a flaw in this plan.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   10 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

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.