Buy To Let Finance Watch

[spyguy]

Martin Lewis is on Radio 5 right now saying don't buy to let at the moment.

He needs to be selling - Sell your BTL before it takes you down.

[Bland Unsight]

Shawbrook now down 30%

[spyguy]

And now we can get into the interesting area of what happens if my small, over-leveraged, under-capitised 'challenger' i.e. BTL bank goes bust?

Do they call the loan in?

Do they raise IRs to 15% to encourage lenders to go elsewhere. But who wants BTL business these days? Big banks dont.

Borrowing money in the unregulated, unprotected sector .... what could go wrong.

[silver surfer]

What's driving the falls? Is it expectation that banks lose business - the EU drives agreements through that drives business to the EU bases?

One part of the reason is that banks struggle to make money when interest rates are low (fees on mortgage arrangements are rising because that's about the only way a bank can make any money on the loan). The expectation has now switched from the decent possibility of a small interest rate rise to the near certainty of an interest rate fall. So now bank profits and bank dividends are looking very shaky.

The commercial property companies, are being hammered because one of the most profitable parts of their business was London office space. In the current climate no one will be looking to rent fresh London office space, indeed the prospect is that as financial institutions relocate staff from London to Europe then there will be a glut of vacant London office space.

House builders are getting a pummelling because, after five or more years of fast rising profits, the expectation is that the party's now over and they won't be able to shift their stock without cutting prices and their land banks have cost them more than the profit they can make from building on them.

Look beyond these sectors and the share prices of many companies are currently rising. Anyone earning their money mainly in a foreign currency is doing well, as are stodgy companies like utilities with largely recession proof earnings.

[silver surfer]

Incidentally, to build on the point about House Builders, the big builders have averaged a profit margin across the last few years of about 18-22%. So a price fall of this magnitude would wipe out all their profits.

Sure, in some future scenario they could then buy land more cheaply and possibly access cheaper building materials and labour, therefore restoring profitability, but right now their land banks are in place and they've paid what they've paid. So for a time horizon of at least three or four years they're pretty much stuck with a business model that the housing market can either make highly profitable or disastrous, purely through retail house pricing. The equity markets are now coming to their own conclusions on the likelihood of this and you can read their prognosis in the collapsing share price of the builders.

I took the view a few months ago that S24 and the implications for BTL landlords (who are the biggest buyers of new houses) meant house prices would start to decline and that decline would accelerate up to the 2020/21 tax year as S24 starts to progressively bite. Consequently I sold out of Persimmon and banked some tidy profits. Sadly I didn't read the runes for British Land and Barclays quite so well so I'm now getting my b*ll*cks handed to me on these investments.

[Bland Unsight]

The Mortgage Works (Nationwide's BTL lender have their new product guide out). The 2-year 75% LTV no fee BTL mortgage drops from 3.69% (11 May 2016 product guide) to 2.99% (24 June 2016 product guide).

That drop of 70 basis points is a 20% drop in the interest rate.

I did post a link to a 23 June 2016 Mortgage Strategy piece trailing the new product guide a couple of pages back on this thread here, and the following quote comes from that article.

Selected two year fixed term buy-to-let products at 65% loan-to-value (LTV) will be reduced by up to 0.20%, and products at 75% LTV will be cut by up to 0.70%.

However, I'm surprised that there's no offsetting change in the fees. They just plain dropped the rate. Clearly the Nationwide still have buy-to-let lending to do this year and intend to get it done.

Edited June 27, 2016 by Ghost Bird

[spyguy]

The Mortgage Works (Nationwide's BTL lender have their new product guide out). The 2-year 75% LTV no fee BTL mortgage drops from 3.69% (11 May 2016 product guide) to 2.99% (24 June 2016 product guide).

That drop of 70 basis points is a 20% drop in the interest rate.

I did post a link to a 23 June 2016 Mortgage Strategy piece trailing the new product guide a couple of pages back on this thread here, and the following quote comes from that article.

However, I'm surprised that there's on offsetting change in the fees. They just plain dropped the rate. Clearly the Nationwide still have buy-to-let lending to do this year and intend to get it done.

Need the fees now.

[Neverwhere]

The Mortgage Works (Nationwide's BTL lender have their new product guide out). The 2-year 75% LTV no fee BTL mortgage drops from 3.69% (11 May 2016 product guide) to 2.99% (24 June 2016 product guide).

That drop of 70 basis points is a 20% drop in the interest rate.

I did post a link to a 23 June 2016 Mortgage Strategy piece trailing the new product guide a couple of pages back on this thread here, and the following quote comes from that article.

However, I'm surprised that there's on offsetting change in the fees. They just plain dropped the rate. Clearly the Nationwide still have buy-to-let lending to do this year and intend to get it done.

Meanwhile, in the Financial Times:

City of London elite blame inequality for BrexitDavid Roberts, chairman of Nationwide Building Society, who said his contact with “ordinary folk” around the country revealed “they see no prospect of improved standards of living”.

FFS

[Bland Unsight]

FFS

OK, I am trying to keep my posting more measured and temperate, so let me say that for a Nationwide Chief Executive to make that statement (whilst drawing a massive salary for channelling literally billions of pounds turning people who might like become to be home owners into the tenants of sketchily financed mug investors) is a little rich.

Edited June 27, 2016 by Ghost Bird

[Neverwhere]

OK, I am trying to keep my posting more measured and temperate, so let me say that for a Nationwide Chief Executive to make that statement (whilst drawing a massive salary for channelling literally billions of pounds turning people who want like to be home owners in to the tenants of sketchily financed mug investors) is a little rich.

Quite!

He was amongst the 'most impassioned contributions to the debate' no less.

[spyguy]

B+B lender of the year 2016

Edited June 27, 2016 by spyguy

[Bland Unsight]

He was amongst the 'most impassioned contributions to the debate' no less.

B+B lender of the year 2016

You're not getting me to break another typewriter!

[Neverwhere]

You're not getting me to break another typewriter!

At least you're not in danger of breaking another building society!

[spyguy]

NW problems is pretty much the same as B+B.

They are letting short term greed and targets override any sense or doubt that maybe they are not lending to the most 'solvent' client base.

NW appears to be running on a basis of faith and overconfidence that they are doing the right thing.

Mix that with a concentration of loans in London and the SE and its going to fun.

As a regulator in an article I read a while ago said - The best way to regulate banks is to throw one under a train every now and again.

Choo Choo.

[spyguy]

Shawbrook showing as down 28% on Google.

Nice to Shawfcked has stopped falling due to Brexit.

Now its falling due to:

'As a result of irregularities in one office in the Asset Finance part of our Business Finance division, the Group expects to book an additional impairment charge of c.£9 million in Q2 2016 on impacted facilities of £14.7 million. The irregularities, which have now been rectified, were the result of a number of loans being underwritten in our Asset Finance business that did not meet the business's strict lending criteria. '

http://announce.ft.com/Detail/?DocKey=1323-12869911-7K27626S7HV4B2HM5408398J1K

Strict lending criteria ..... yesssssssss

[InlikeFlynn]

One part of the reason is that banks struggle to make money when interest rates are low (fees on mortgage arrangements are rising because that's about the only way a bank can make any money on the loan). The expectation has now switched from the decent possibility of a small interest rate rise to the near certainty of an interest rate fall. So now bank profits and bank dividends are looking very shaky.

The commercial property companies, are being hammered because one of the most profitable parts of their business was London office space. In the current climate no one will be looking to rent fresh London office space, indeed the prospect is that as financial institutions relocate staff from London to Europe then there will be a glut of vacant London office space.

House builders are getting a pummelling because, after five or more years of fast rising profits, the expectation is that the party's now over and they won't be able to shift their stock without cutting prices and their land banks have cost them more than the profit they can make from building on them.

Look beyond these sectors and the share prices of many companies are currently rising. Anyone earning their money mainly in a foreign currency is doing well, as are stodgy companies like utilities with largely recession proof earnings.

Incidentally, to build on the point about House Builders, the big builders have averaged a profit margin across the last few years of about 18-22%. So a price fall of this magnitude would wipe out all their profits.

Sure, in some future scenario they could then buy land more cheaply and possibly access cheaper building materials and labour, therefore restoring profitability, but right now their land banks are in place and they've paid what they've paid. So for a time horizon of at least three or four years they're pretty much stuck with a business model that the housing market can either make highly profitable or disastrous, purely through retail house pricing. The equity markets are now coming to their own conclusions on the likelihood of this and you can read their prognosis in the collapsing share price of the builders.

I took the view a few months ago that S24 and the implications for BTL landlords (who are the biggest buyers of new houses) meant house prices would start to decline and that decline would accelerate up to the 2020/21 tax year as S24 starts to progressively bite. Consequently I sold out of Persimmon and banked some tidy profits. Sadly I didn't read the runes for British Land and Barclays quite so well so I'm now getting my b*ll*cks handed to me on these investments.

An interesting analysis. Presumably housebuilders import many of their building materials so are also facing some sudden increases in costs due to the pound dropping.

Sorry to hear about your misadventure with Barclays. I was positioned to avoid much UK exposure before the vote but I sold my remaining UK equities yesterday, preserving a small profit but only a bit better than cash deposit over the few years I have held them. Given my unerring knack for timing the market wrong you may take this as the market bottom!

[Ah-so]

The finance director of Shawbrooks has resigned to 'spend more time with his family' according to the Evening Standard.

[spyguy]

The finance director of Shawbrooks has resigned to 'spend more time with his family' according to the Evening Standard.

Probably to help look for tenants for the BTL homes his family has bought recently ....

[spyguy]

Wierd DM article.

Banks suspend deals for landlords: Buy-to-let lenders pulling loans in case homes slip into negative equity

http://www.dailymail.co.uk/money/mortgageshome/article-3664774/Banks-suspend-large-deals-landlords-stop-borrowers-slipping-negative-equity-house-prices-fall.html

'Buy-to-let lenders are temporarily pulling loans for borrowers with small deposits until the dust from the Brexit vote settles.

They are doing this to stop landlords slipping into negative equity if house prices fall — something on which experts are divided.

Negative equity is when borrowers are stuck with debts which are bigger than the value of their home.'

Small deposits? Try getting a BTL without 60% down!

[Venger]

Wierd DM article.

Banks suspend deals for landlords: Buy-to-let lenders pulling loans in case homes slip into negative equity

http://www.dailymail.co.uk/money/mortgageshome/article-3664774/Banks-suspend-large-deals-landlords-stop-borrowers-slipping-negative-equity-house-prices-fall.html

'Buy-to-let lenders are temporarily pulling loans for borrowers with small deposits until the dust from the Brexit vote settles.

They are doing this to stop landlords slipping into negative equity if house prices fall — something on which experts are divided.

Negative equity is when borrowers are stuck with debts which are bigger than the value of their home.'

Small deposits? Try getting a BTL without 60% down!

Precious capital? Although my view to date has been banks lending to BTLers because BTLer puts down chunky deposit to handle correction, and can sell their own home to make their lender whole for any further people-farming quest BTL mortgage debt, into a HPC.

Lenders, like their predecessors of 1929, will not wish to magically turn $1 cash into a loan worth just 80c much less 60c.

[Granit]

BoE money and credit stats released today for May.

http://www.bankofengland.co.uk/statistics/Pages/mc/2016/may.aspx

The moron spike:

Approvals slightly up on April and still v.high.

But it's being driven by remortgaging (same as the CML data showed last month, it has been for a long time), mortgages in red, re in purple

[Neverwhere]

Another lender clamps down on landlords - but could Brexit rescue buy-to-let?

"But analysts say Brexit may offer some relief to the sector: if house prices fall faster than rent, landlords' yields could rise. The difficulty in obtaining mortgages might also be eased, as the rent would cover more of the interest cost . . . If prices were to plateau or even come down a little bit that could help them add to their portfolio. Obviously it's not great for their existing properties, but it could provide a little bit of relief."

[Neverwhere]

Oh, and TSB have upped their rental cover requirement to 145pc.

[South Lorne]

BoE money and credit stats released today for May.

http://www.bankofengland.co.uk/statistics/Pages/mc/2016/may.aspx

The moron spike:

Approvals slightly up on April and still v.high.

But it's being driven by remortgaging (same as the CML data showed last month, it has been for a long time), mortgages in red, re in purple

...reflects the bubble and burst created by the Chancellor who delayed in his end of 2015 year budget Stamp Duty increases for BTL to April 6th 2016.....he designed the bubble and the following bust after April 6th...

[Granit]

http://ftalphaville.ft.com/marketslive/2016-06-29/

Lots on the specialist lenders in today's markets live.

From JPM caze: