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Bof E Could Crack Down On 'risky' Buy-to-let Mortgages

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....this this could nullify the Guardians predictions on rentng .... :rolleyes:

Ministers to hand out powers that would limit lending to landlords
  • George Osborne is to consider further measures to curb buy-to-let boom
  • He is looking into giving the Bank of England new wide-ranging powers
  • Such restrictions would be a radical tightening of the unregulated market
  • Currently landlords are not subject to same tough lending criteria as others
  • Britain's army of landlords has grown to more than 2million in six years

http://www.dailymail.co.uk/news/article-3170154/Bank-crack-risky-buy-let-mortgages-warns-Osborne-Ministers-hand-powers-limit-lending-landlords.html

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Bank of England has been asking for formal powers to regulate Buy to Let mortgages for a while now.

http://uk.reuters.com/article/2015/07/08/uk-britain-boe-idUKKCN0PI0S620150708

I guess the Treasury is finally coming around to it. The changes in the last budget could bring forward the risks the BoE warned about a few months back.

..as IRs rise ...this is a bubble that will explode in mid air ...better to lower it gently in anticipation..... :rolleyes:

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Well done BOE! You have successfully identified risk and bubble. Are you planning MMR 2 for BTL?

What will it include? 50% LTV? Higher IR?

Edited by Fairyland

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Only a few years (10?) too late.

There was no BTL, as we know it, before 2002-ish. Well, not in any volume.

Before that it wa plain and simple and expensive business loans if you wanted to buy an extra house.

The banks loaned to BTL in huge volumes as they earned fees when they sold the product. The fact the product exploded a few yearslaters - B+B in 2008, Nationwide (probably) in a year or two, was neither here or there.

Banks risk models are too simple. How many BTL loans in default in 2005. Not many, crank up lending!

How many BTL loans in defauly 2015? Probably 70% of the loans from 2005.

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The only trouble is that because the lending criteria are far more relaxed and unregulated, that has undoubtedly encouraged individuals to use it to buy homes for personal use somehow.

I'm not sure this argument will fly, IMO.

The suggestion that the Bank of England have always been relaxed about interest-only mortgage financed buy-to-let investors is also at best dubious.

I'd be pretty sure that the majority of the existing stock of BTL IO mortgage financed property investments were made initially at a time when the Bank of England had no remit and no powers over the sector, so they were neither relaxed nor not relaxed - it was just somebody else's problem.

More latterly, I'm much more inclined to believe that they knew that they were turning off the credit spigot into the owner-occupied sector (MMR) and they underestimated the extent to which buy-to-let investors would be willing to take up the slack, (not quite the same thing as being relaxed).

Returning to my original point, seeing as to make the kind of fraudulent mortgage application you'd need to make to take out a buy-to-let mortgage in order to buy a house you intend to live in, you'd need to fake having a house with significant equity and good earnings. Obviously, if the banks aren't checking then there might be something to what you say, but I've seen no evidence that they aren't checking and plenty of property round my neck of the woods is being sold and then coming on to the market for rent.

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The BoE has always been relaxed about btl, indeed like banks and bsocs profess to like it because of its 'low risk' compared to ftb's for instance, as there is another layer (the landlord) before the problem lands at the lender's door.

The only trouble is that because the lending criteria are far more relaxed and unregulated, that has undoubtedly encouraged individuals to use it to buy homes for personal use somehow.

Further, if ltv's are still high and interest only and the business model comes under attack from rates and taxes, then there are obvious risks if home prices adjust downwards in response. After all its not as simple as just passing all the cost onto tenants because as a group, they would have done so already.

Desperate first-time buyers warned over attempts to use buy-to-let mortgages

Some first-time homebuyers pretend to be landlords in order to get a loan – but lenders have wised up to the ploy

23 Aug 2014

53 Comments

Desperate buyers unable to secure an ordinary loan have tried to claw their way on to the property ladder by pretending they were going to let the property.

The issue was brought into sharp focus when new rules were introduced in April on residential mortgages, requiring borrowers to answer a range of questions about their income and spending habits to prove they could afford the loan.

Affordability requirements for investment properties are more lax, with lenders looking at whether the rental income will cover the mortgage repayments rather than relying on a borrower’s earned income. It is also far easier to get a cheaper interest-only loan for a buy-to-let property.

Brokers say desperate first-time buyers tried to get around the affordability requirements of residential loans by going for a buy-to-let deal instead.

One leading broker said it saw a 46pc rise in the number of buy-to-let enquiries from first-time buyers in May, just weeks after the new rules were introduced.

moar http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/11031884/Desperate-first-time-buyers-warned-over-attempts-to-use-buy-to-let-mortgages.html

Perhaps we can offer pre-MMR and post-MMR FTB-BTLer mortgage getters (who slipped through the checks somehow) a compensation scheme of some sort in event of a HPC? No borrower can see trouble ahead, so bail them out, keep priced doubling for stupid renters.

Release date: October 26, 2004

Grand Theft Auto: San Andreas

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Neverwhere.. does the ad remind you of someone's house? :P

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....this this could nullify the Guardians predictions on rentng .... :rolleyes:

To be exact, they weren't the Grauniad's predictions, they were PricewaterhouseCooper's. The Torygraph carried a story on the same PwC report.http://www.telegraph.co.uk/finance/economics/11754122/Most-20-to-39-year-olds-will-be-in-private-rented-homes-by-2025-warns-PwC.html

Edit: spelling

Edited by Snugglybear

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Hell yeh! Do you think the mirrors were MEWed? Too funny Venger...

It must be to prolong the reflection of his success. :)

It's like the full-list; big jacuzzi/hot-tub, spa and packed wet-bar. The tax-relief change has come as a big surprise to his BTL empire !!!

:lol::lol::lol:

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Same source, different article:

Osborne poised for ‘imminent’ new crackdown on buy-to-let

Chancellor George Osborne could crack down on the buy-to-let sector “imminently”.

The new curbs would be on top of measures already announced this month, to scrap the wear and tear allowance and to limit tax relief on the interest of buy-to-let mortgages.

Osborne has now told the Treasury Select Committee that the Bank of England could be handed radical new powers.

These could include the Bank being given powers to restrict the number and size of buy-to-let mortgages.

The Bank of England has warned that a buy-to-let bubble could threaten the financial stability of the whole country.

Osborne said he had already asked Bank of England governor Mark Carney for a consultation.

Asked by MPS about a timeframe, Osborne said: “I think the next couple of months. I have just written a letter [to Carney]. It’s all imminent. It’s happening this year.”

The move follows a downbeat assessment by the Residential Landlords Association of the curbs so far announced.

It says that as a direct result of the Budget, 65% of landlords are now considering raising their rents.

The RLA also attacked Osborne for arguing that landlords are currently taxed more favourably than home owners.

Alan Ward, RLA chairman, said that this was wrong, since unlike home owners, landlords are taxed on capital gains.

He said: “The belief that landlords should be compared to home owners is like comparing apples with pears. The two are vastly different.

“It’s time the Treasury recognised residential landlords as a business.”

http://www.propertyindustryeye.com/osborne-poised-for-imminent-new-crackdown-on-buy-to-let/

And one comment so far...

Robert May

July 23, 2015 at 7:16 am

Sorry Mr Osborne you haven’t thought this through have you? Even with no tax breaks at all BTL is still a better investment than with the financial service industry.
Let me see 5-10% yield plus compound 7% capital growth, even taxed at a full 40% (net 3%) it is still better than getting 2% off your FS banker who then take 1% in fees (effectively a 50% tax on yield)
This strategy is a delaying tactic for inevitable interest rate rises that will decimate the London South East property market which is about 16% over inflated right now. An over inflated market funded by excessive LTV mortgage calculations. This won’t be pretty to watch.

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This is a terrible indictment of Royal Mail. Osborne can't have received all those letters from landlords pointing out how wrong he is yet.

If he was wise he'd wait for the input from this valued hub of wealth generation before doing anything.

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When property prices where soaring, BTL made sense even for the banks. Very little risk for the bank when property prices are going up by 10% per annum, you can afford to relax lending criteria because it was easy money and anyone could do it. Trouble is when house prices stop increasing suddenly the new loans look a huge risk and the landlords and banks can end up in trouble very quickly.

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It must be to prolong the reflection of his success. :)

139699914322491.jpg

...It's like the full-list; big jacuzzi/hot-tub, spa and packed wet-bar. The tax-relief change has come as a big surprise to his BTL empire !!!

:lol::lol::lol:

"It's only a risk if you get into money troubles or the economy changes" :lol::lol::lol:

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Same source, different article:

http://www.propertyindustryeye.com/osborne-poised-for-imminent-new-crackdown-on-buy-to-let/

And one comment so far...

Robert May

July 23, 2015 at 7:16 am

Sorry Mr Osborne you haven’t thought this through have you? Even with no tax breaks at all BTL is still a better investment than with the financial service industry.

Let me see 5-10% yield plus compound 7% capital growth, even taxed at a full 40% (net 3%) it is still better than getting 2% off your FS banker who then take 1% in fees (effectively a 50% tax on yield)

This strategy is a delaying tactic for inevitable interest rate rises that will decimate the London South East property market which is about 16% over inflated right now. An over inflated market funded by excessive LTV mortgage calculations. This won’t be pretty to watch.

Who does he think is providing the BTL mortgages? :blink:

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139699914322491.jpg

"It's only a risk if you get into money troubles or the economy changes" :lol::lol::lol:

it was only a good for the banks if people weren't using the previous 10% increase, mew'd, as the deposit for their next investment.

ponzi alert!!!!

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it was only a good for the banks if people weren't using the previous 10% increase, mew'd, as the deposit for their next investment.

ponzi alert!!!!

They thought they were lending to lions, turns out they were only house cats after all :P

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Who does he think is providing the BTL mortgages? :blink:

He doesn't think. There is in fact a clause in all BTL mortgage contracts wherein you attest that your only property related thoughts are moar, moar, moar. Morourns.

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To be exact, they weren't the Grauniad's predictions, they were PricewaterhouseCooper's. The Torygraph carried a story on the same PwC report.http://www.telegraph.co.uk/finance/economics/11754122/Most-20-to-39-year-olds-will-be-in-private-rented-homes-by-2025-warns-PwC.html

Edit: spelling

..yes...PWC will have to update there projections taking into account the Chancellor's directives to the BofE and vice versa...and whoever takes responsibility for this out of control reckless bubble blowing in the wind......and let the Guardian and their readers comment on the resulting change to the housing horizon ...."dittos" for the Torygraph....... :rolleyes:

Edited by South Lorne

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He doesn't think. There is in fact a clause in all BTL mortgage contracts wherein you attest that your only property related thoughts are moar, moar, moar. Morourns.

...one may have to look at the lenders to try and understand their role and mindset in this.... and their risk management controls ...if such consideration actually exists ..?.... :rolleyes:

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...one may have to look at the lenders to try and understand their role and mindset in this.... and their risk management controls ...if such consideration actually exists ..?.... :rolleyes:

No, none at all.

We had a local, long standing building society go up in a puff of smoke a few years ago - Scarborough Building Society.

They went from conservative lending up til the mid 90s to trying to out compete Norther Rock in their last few years.

The rumours I've heard are jaw dropping. Rumours they may be but they are probably true as the place is small and stuff gets out quickly.

Advancing 1m to someone on the dole for his BTL portfolio - Tick.

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