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The proposed taxation change to the relief given on BTL finance costs announced in the Summer Budget, together with potential macroprudential action by the Financial Policy Committee to reduce risks emanating from BTL lending, could lead to fundamental changes in the BTL lending market over the next few years.

I've therefore started this thread so that we can monitor trends in BTL mortgage financing.

Items are interest are (for example) changes in the levels of BTL lending on lenders' balance sheets, average LTVs of the BTL mortgage book, arrears and non-performing loans, mortgage rates, underwriting standards (e.g. minimum rental cover).

Please contribute if you come across any relevant info.

---------------

First up is Coventry Building Society, which reported H1 2015 results this morning.

In the six months to 30 June 2015, outstanding owner occupier mortgage balances increased by £901m whereas outstanding BTL balances rose by £930m.

36.8% of Coventry BS's mortgage book is now accounted for by BTL.

CoventryBS_H12015.gif

Mark Parsons, CEO:

"Whilst the interest we pay to savers continues to be substantially above the average in the market, we believe the challenge of a historically low interest rate environment is also encouraging people to seek out higher yielding alternatives to traditional savings accounts, including the buy to let sector. In this context, we believe the relationship between savers and borrowers has changed, as many investors now look to the rental market as another means to diversify and supplement income."

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This is from the Mortgages for Business Q2 2015 Buy to Let Mortgage Costs Index.

It's being suggested that the gap in rates between corporate and non-corporate BTL products will narrow as landlords incorporate in response to the new taxation regime and competition amongst lenders for that business increases.

Note that the table is comparing limited company products with the average for the market as a whole, which of course includes the company products. The gap between corporate and non-corporate rates is therefore larger than it appears from a first glance.

BTL_MortgageCostsIndex_Q2_2015.gif

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Lloyds Banking Group H1 results this morning.

Mainstream mortgage balances decreased, but BTL increased:

LLoydsBankingGroup_H12015a.gif

LTV breakdown:

LLoydsBankingGroup_H12015b.gif

Could be nothing, but if you look at the shift in LTV for BTL customers, it looks like the banks are thinking that a 70-80% LTV is where they want to be.

Certainly they seem to be reducing their higher LTV book.

Preparing for something? Could be legislation or could be price drops.

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So Lloyds by themselves have £54 BILLION pounds invested in BTL in the UK ? Did I read that correctly.. :blink:

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So Lloyds by themselves have £54 BILLION pounds invested in BTL in the UK ? Did I read that correctly.. :blink:

Yep, you did.

And if you go back to 2009, the split was £44bn BTL vs £270bn mainstream.

Edit: £18.5bn of the drop in mainstream balances was due to the divestment of TSB.

Edited by FreeTrader

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So Lloyds by themselves have £54 BILLION pounds invested in BTL in the UK ? Did I read that correctly.. :blink:

As a proportion of their total loan book, it appears to be in line with the industry.

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Yep, you did.

And if you go back to 2009, the split was £44bn BTL vs £270bn mainstream.

Edit: £18.5bn of the drop in mainstream balances was due to the divestment of TSB.

So £54 billion in BTL, yet also did I read correctly that only £8.8 million is invested in UK businesses? (adding Loans and Retail Business Banking)

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So £54 billion in BTL, yet also did I read correctly that only £8.8 million is invested in UK businesses? (adding Loans and Retail Business Banking)

I'm sure you meant £8.8 billion.

The 'loans' figure in retail banking mainly relates to personal unsecured loans and overdrafts. The retail division does make loans on a personal basis to small businesses and start-ups, but the bulk of Lloyds' business lending is handled by its commercial banking division (£100bn in loans outstanding).

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And this one is from Nationwide's preliminary results for the year end 4 April 2015, which I first posted on the statistics thread back in May:

Nationwide2015a.gif

Just seen this.

The two things that jump out to me are:

1) ~20% of the mortgage book is 'specialist' i.e. BTL. Now bare in mind that NW have only been in the BTL market for ~10 years.

2) 2014 saw an increase of ~5,000m of OO mortgages and 2,000m in BTL.

Nw really seem to have took over the slack from the likes of B+B.

Should a BS be providing BTL? Should it fck!

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Just seen this.

The two things that jump out to me are:

1) ~20% of the mortgage book is 'specialist' i.e. BTL. Now bare in mind that NW have only been in the BTL market for ~10 years.

2) 2014 saw an increase of ~5,000m of OO mortgages and 2,000m in BTL.

Nw really seem to have took over the slack from the likes of B+B.

Should a BS be providing BTL? Should it fck!

The BS's moved into this area for a host of reasons not least to avoid regulation and drive earnings higher.

When you look at the small profits being made by some of the smaller BS's you do wonder how they'd survive without BTL lending.

However,when you look at the potential exposure around the 85% lTV level,it wouldn't take much of a downswing to see some of the smaller players in some serious trouble.

On this latter point,there's an air of inevitability given the changes to BTLers being able to offset mortgage interest.

Edited by Sancho Panza

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Should a BS be providing BTL? Should it fck!

This is how the Nationwide board sees it (from the results report):

"We also play a significant role in supporting a balanced approach to housing tenure by the provision of high quality buy to let loans through our subsidiary, The Mortgage Works."

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The proposed taxation change to the relief given on BTL finance costs announced in the Summer Budget, together with potential macroprudential action by the Financial Policy Committee to reduce risks emanating from BTL lending, could lead to fundamental changes in the BTL lending market over the next few years.

I've therefore started this thread so that we can monitor trends in BTL mortgage financing.

Items are interest are (for example) changes in the levels of BTL lending on lenders' balance sheets, average LTVs of the BTL mortgage book, arrears and non-performing loans, mortgage rates, underwriting standards (e.g. minimum rental cover).

Please contribute if you come across any relevant info.

---------------

First up is Coventry Building Society, which reported H1 2015 results this morning.

In the six months to 30 June 2015, outstanding owner occupier mortgage balances increased by £901m whereas outstanding BTL balances rose by £930m.

36.8% of Coventry BS's mortgage book is now accounted for by BTL.

CoventryBS_H12015.gif

Mark Parsons, CEO:

"Whilst the interest we pay to savers continues to be substantially above the average in the market, we believe the challenge of a historically low interest rate environment is also encouraging people to seek out higher yielding alternatives to traditional savings accounts, including the buy to let sector. In this context, we believe the relationship between savers and borrowers has changed, as many investors now look to the rental market as another means to diversify and supplement income."

..on principle alone I will not be putting my money there..... :rolleyes:

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The BS's moved into this area for a host of reasons not least to avoid regulation and drive earnings higher.

When you look at the small profits being made by some of the smaller BS's you do wonder how they'd survive without BTL lending.

However,when you look at the potential exposure around the 85% lTV level,it wouldn't take much of a downswing to see some of the smaller players in some serious trouble.

On this latter point,there's an air of inevitability given the changes to BTLers being able to offset mortgage interest.

The mutuals are NOT SUPPOSED TO MAKE A PROFIT. Well, they can, but it is supposed to be run for the benefit of members - i.e. without needing to pay dividends out to investors, you can offer lower mortgage rates and higher saving rates. plus get your capital up cheaply.

Small mutuals should be able to run fine without BTL.

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The BS's moved into this area for a host of reasons not least to avoid regulation and drive earnings higher.

When you look at the small profits being made by some of the smaller BS's you do wonder how they'd survive without BTL lending.

However,when you look at the potential exposure around the 85% lTV level,it wouldn't take much of a downswing to see some of the smaller players in some serious trouble.

On this latter point,there's an air of inevitability given the changes to BTLers being able to offset mortgage interest.

I wonder how the BS's will survice *with* BTL.

Didn't do a lot for B+B

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This is how the Nationwide board sees it (from the results report):

"We also play a significant role in supporting a balanced approach to housing tenure by the provision of high quality buy to let loans through our subsidiary, The Mortgage Works."

Balanced depends on your physics!

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The mutuals are NOT SUPPOSED TO MAKE A PROFIT. Well, they can, but it is supposed to be run for the benefit of members - i.e. without needing to pay dividends out to investors, you can offer lower mortgage rates and higher saving rates. plus get your capital up cheaply.

Small mutuals should be able to run fine without BTL.

Retained earnings form part of the capital buffer.Not sure on the niceties of BS accounting,maybe someone could help.

Edit to add that I agree it's an area of business they should never have got involved in for both moral and commercial reasons.But they have CEO's with ego's that need feeding.Ultimately it represents the failure of the membership structure to oversee the work of the Board imo.

Edited by Sancho Panza

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I wonder how the BS's will survice *with* BTL.

Didn't do a lot for B+B

Quite.Either way they're mostly going to be looking to be taken over or merged together.If they're lucky.These are what should be mundane businesses that carry some exotic salaries.

Long term,I suspect taxpayers will end up with more overpriced crud.Rant over.

Edited by Sancho Panza

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This is how the Nationwide board sees it (from the results report):

"We also play a significant role in supporting a balanced approach to housing tenure by the provision of high quality buy to let loans through our subsidiary, The Mortgage Works."

Nope.

Thats how the Board want you to think they see it.

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Quite.Either way they're mostly going to be looking to be taken over or merged together.If they're lucky.These are what should be mundane businesses that carry some exotic salaries.

Long term,I suspect taxpayers will end up with more overpriced crud.Rant over.

I'm not sure on this. I think they've got the rules in place now to let a BS/bank go under and claw back previous bonuses.

They need a test. I have my eye on Skipton being the first.

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