Buy To Let Finance Watch

[CHF]

http://www.mortgagestrategy.co.uk/2023366.article?cmpid=msbreak_1530957

Choice quote

"Like most good businessmen, buy-to-let investors stress test their businesses and plan ahead"

So surely that planning ahead would have involved putting aside the relevant CGT owed each time they mewed. Which obv means that they are all sat on piles of cash.

Edited September 2, 2015 by CHF

[Neverwhere]

and the discussion there has turned to risk

http://www.property118.com/number-of-buy-to-let-mortgages-available-hits-1000/78545/#comment-63659

"As for risk in lending to BTL it’s very low as they take a 25% deposit."

"If there was true competition in the BTL mortgage sector I would have thought that there would have been plenty of libor +1% for term type deals"

"But, if I was a bank that can create money out of thin air, I would be less fussy and the offers on the market now do look about right on the basis that the money lent is, essentially, free to the lender."

Banks create money out of thin air in aggregate, but individual banks still have funding costs. Broadly speaking this is because they have to attract that newly created money back into the bank by offering good returns on deposits or by borrowing it back (not literally the exact same money, you understand). I'm sure someone with a greater understanding than I can explain in better and more accurate detail. In the meantime the Bank of England issued a pretty accessible report on bank funding last year:

Bank funding costs: what are they, what determines them and why do they matter?

[Ah-so]

Buy to let is of course funded through the Bank of England's FLS. Look at the biggest borrowers. It reads like a BTL broker's speed dial.

http://www.bankofengland.co.uk/publications/Pages/fls/q215.aspx

Aldemore have borrowed £710m FFS!

[FreeTrader]

Press release from HSBC (extracts):

HSBC is making a fundamental change to its Buy To Let range of mortgages by making them available to non-HSBC customers for the first time. It is also reducing the amount of rental cover required and providing more Loan To Value (LTV) options.

The new range is available from Monday 7 September, following changes made earlier in the year to make Buy To Let mortgages available to more HSBC customers and launching Buy To Let (BTL) further advances.

Changes to HSBC’s Buy To Let mortgage policy include:

• Opening the range to non-HSBC customers and standalone applications;
• Reducing the rental cover required to 125% from 130%;
• Increasing the maximum LTV on Buy To Let further advances to 75% from 60% LTV; and
• Assessing the Buy To Let mortgage application on rental income only.

Tracie Pearce, Head of Mortgages at HSBC, said: "We’ve sharpened our offering and expect to be able to help even more customers achieve their Buy To Let ambitions.

“The availability of Buy To Let products is now at its highest point since 2008. High rents and low interest rates mean customers are increasingly seeing Buy To Let as an attractive investment opportunity. The policy and pricing changes we have made will make our range available to even more people.”

[pipllman]

Tracie Pearce, Head of Mortgages at HSBC, said: "We’ve sharpened our offering and expect to be able to help even more customers achieve their Buy To Let ambitions.

“The availability of Buy To Let products is now at its highest point since 2008. High rents and low interest rates mean customers are increasingly seeing Buy To Let as an attractive investment opportunity. The policy and pricing changes we have made will make our range available to even more people.”

What Tracie really means is that HSBC is a lending institution and it needs to lend to make money. As other pools of customers for debt are drying up, BTL is the only game in town and HSBC wants its share. We are competing with a selection of other lenders that, like us, have access to essentially free money to lend out, hence we can be a bit less strict on lending criteria than we would if it was our own money at stake.

[Guest_growlers_*]

Press release from HSBC (extracts):

Isn't this the opposite of what we would have expected post budget? I.e lower rental cover and higher LTVs.

[pipllman]

Isn't this the opposite of what we would have expected post budget? I.e lower rental cover and higher LTVs.

Don't argue with Tracie, she is Head of Mortgages at HSBC and she says

"High rents and low interest rates mean customers are increasingly seeing Buy To Let as an attractive investment opportunity."

Like lambs to the slaughter, she shepherds them in...

and takes the £2k application fee from every one of them!

Edited September 7, 2015 by pipllman

[Venger]

Don't argue with Tracie, she is Head of Mortgages at HSBC and she says

"High rents and low interest rates mean customers are increasingly seeing Buy To Let as an attractive investment opportunity."

Like lambs to the slaughter, she shepherds them in...

and takes the £2k application fee from every one of them!

[Nabby81]

Don't argue with Tracie, she is Head of Mortgages at HSBC and she says

"High rents and low interest rates mean customers are increasingly seeing Buy To Let as an attractive investment opportunity."

Like lambs to the slaughter, she shepherds them in...

and takes the £2k application fee from every one of them!

Let us all celebrate high rents ..such a huge benefit to the country ...

It's all going very 2007 ..hopefully when the bubble bursts it goes with a bang

[pipllman]

Let us all celebrate high rents ..such a huge benefit to the country ...

It's all going very 2007 ..hopefully when the bubble bursts it goes with a bang

As long as the government doesn't bail out any lenders that fail (but does honour the savings guarantee), I am all for them falling over each other to lend money to whoever they judge is fit to borrow it.

[Neverwhere]

Buy to let is of course funded through the Bank of England's FLS. Look at the biggest borrowers. It reads like a BTL broker's speed dial.

http://www.bankofengland.co.uk/publications/Pages/fls/q215.aspx

Aldemore have borrowed £710m FFS!

FLS funding is definitely being used for buy-to-let lending (I'm not sure if there is any real limitation on where lenders can use that funding once it's been secured?) but the FLS guidelines indicate that no new FLS funding can be secured against BTL, which is some improvement at least.

For reference, in case anyone is interested, there is a clear change in how BTL is treated between 2013 Q2-4 (FLC) and 2014 (FLD) and 2015 (FDE). Emphasis added but the square bracket annotations are the Bank's own:

Form FLC Guidelines - Funding for Lending Scheme

Section 1 - Total loans to non-financial corporations other than public corporations

This section refers to lending specifically to UK resident PNFCs. These are typically companies that produce goods or provide non-financial services. They include public limited companies, private companies and partnerships where these are distinct from their owners . . . Buy to let lending to unlimited liability partnerships included in this section should not be included within the 'of which corporate SMEs' items. [updated January 2014]

Section 2 - Total loans to individuals and individual trusts, unincorporated businesses and non-profit institutions serving households

The section refers to loans specifically to UK resident households; this includes individuals and individual trusts, UBs and non-profit institutions serving households . . . Buy to let lending to households should be included in this section but not within the 'of which UBs' items. [updated November 2013]

Form FLD Guidelines - Funding for Lending Scheme

Section 1 - Total loans to non-financial corporations other than public corporations

This section refers to lending specifically to UK resident PNFCs. These are typically companies that produce goods or provide non-financial services. They include public limited companies, private companies and partnerships where these are distinct from their owners . . . Buy to let lending to unlimited liability partnerships should not be included in this section. [updated January 2014]

Section 2 - Total loans to unincorporated businesses

This section refers to loans specifically to UK resident unincorporated businesses (UBs) . . . Buy to let lending should not be included in this section.

Form FLE Guidelines - Funding for Lending Scheme

Section 1 - Total loans to corporate SMEs

This section refers to lending specifically to UK resident corporate SMEs. These are defined here as private non-financial corporations with annual debit account turnover on the (bank or building society) main business account of less than £25 million . . . Buy to let lending to unlimited liability partnerships should not be included in this section.

Section 2 - Total loans to unincorporated businesses

This section refers to loans specifically to UK resident unincorporated businesses (UBs) . . . Buy to let lending should not be included in this section.

[long time lurking]

Buy to let is of course funded through the Bank of England's FLS. Look at the biggest borrowers. It reads like a BTL broker's speed dial.

http://www.bankofengland.co.uk/publications/Pages/fls/q215.aspx

Aldemore have borrowed £710m FFS!

Time to move an ISA from there

[pipllman]

I meant to post this ages ago and was reminded by it appearing on 118 just today

Moody's: UK buy-to-let tax relief cuts will curb BTL lending in the short term, but 2015 could be the best year yet for BTL deal issuance

https://www.moodys.com/research/Moodys-UK-buy-to-let-tax-relief-cuts-will-curb--PR_331612

Edited September 20, 2015 by pipllman

[Guest_growlers_*]

I meant to post this ages ago and was reminded by it appearing on 118 just today

Moody's: UK buy-to-let tax relief cuts will curb BTL lending in the short term, but 2015 could be the best year yet for BTL deal issuance

https://www.moodys.com/research/Moodys-UK-buy-to-let-tax-relief-cuts-will-curb--PR_331612

What a moronic article.

Did you read it?

Deleted

So based on mostly pre budget data we were on track for a post crisis record! Wow that is insightful!

Deleted

So everything is ******ed.

Deleted.

But it's OK...we've written a report

Deleted.

As long as people still believe in the housing shortage fairy (as a key determinant of house prices) and nothing even slightly bad happens we should be ok!

Was interested that Paragon have issued 40% of BTL since the financial crisis tho!

No mention of pending BoE regulations either!

Edit - deleted text from article following reading their copy and reproduction T&Cs

Edited September 20, 2015 by growlers

[pipllman]

Yes, I read it and the more detailed piece it refers to.

The thing to remember about Moody's is that it is regarded as an expert. Whilst you and I might agree that the article is near useless, people that have more influence on the housing market (in the broadest sense), will use such things to support & influence their decision making.

That is a worrying thing - are they just charging headlong into a disaster on the back of such 'authoritative reports'??

[Guest_growlers_*]

Yes, I read it and the more detailed piece it refers to.

The thing to remember about Moody's is that it is regarded as an expert. Whilst you and I might agree that the article is near useless, people that have more influence on the housing market (in the broadest sense), will use such things to support & influence their decision making.

That is a worrying thing - are they just charging headlong into a disaster on the back of such 'authoritative reports'??

Yes, I agree.

I wouldn't claim to be an expert. Not at all...but they are selling a report for $550 which, assuming the details are consistent with the summary article, is as you say near useless.

It was quite eye opening to me. I don't have a Moody's account like you (work related perhaps...). Are they churning this crap out for other industries too? Perhaps the main report is more nuanced.

Nothing about pending BOE regulations - which the consultation can only be months away?

Nothing about the shift to incorporating lending - pro / cons etc.

Nothing about Basel 3 - even just to say it ages away and won't be an issue.

Thanks for posting the link. Was interesting.

[Venger]

Yes, I read it and the more detailed piece it refers to.

The thing to remember about Moody's is that it is regarded as an expert. Whilst you and I might agree that the article is near useless, people that have more influence on the housing market (in the broadest sense), will use such things to support & influence their decision making.

That is a worrying thing - are they just charging headlong into a disaster on the back of such 'authoritative reports'??

It's only a few years ago that all the ratings agencies AAA+. Let's not have a breakdown for the next round of HPI+++BTL believers who are charging in, or a report they didn't pay for. Not specific individual advice. When they can see the asking prices of houses.

They exist to be gouged, the property-speculators, imo. Place you 25% deposits down BTLers.. MEW it, yeah. Insane. Won't bother me if they lose it all, and have to be put up in a caravan by local gov.

Why would I care about those racing into parasitical capitalism, to people farm. Those who already own their own homes, and want to squeeze others for rent.

Gd post growlers.

[Guest_growlers_*]

What a moronic article.

Did you read it?

Deleted

So based on mostly pre budget data we were on track for a post crisis record! Wow that is insightful!

Deleted

So everything is ******ed.

Deleted.

But it's OK...we've written a report

Deleted.

As long as people still believe in the housing shortage fairy (as a key determinant of house prices) and nothing even slightly bad happens we should be ok!

Was interested that Paragon have issued 40% of BTL since the financial crisis tho!

No mention of pending BoE regulations either!

Edit - deleted text from article following reading their copy and reproduction T&Cs

Would someone be able to refer me to rules / advise about posting text copied from articles into posts?

Just curious.

[Neverwhere]

...Was interested that Paragon have issued 40% of BTL since the financial crisis tho!...

I think they meant 40% of BTL RMBS issuance since the financial crisis otherwise the end of the sentence - "with a total of nine transactions collectively worth GBP3.2 billion" - doesn't make any sense.

[lastlaugh]

I think they meant 40% of BTL RMBS issuance since the financial crisis otherwise the end of the sentence - "with a total of nine transactions collectively worth GBP3.2 billion" - doesn't make any sense.

Does anybody know which institutions are buying these RMBS? Although, strictly speaking, they aren't residential mortgages so must be some other kind if security.

I'm especially interested, because I believe the buyers of these securities are the weak links. The coupons are too low for the risks attached to these securities. 75% LTV is not nearly enough for these tiny yields.

[pipllman]

Does anybody know which institutions are buying these RMBS? Although, strictly speaking, they aren't residential mortgages so must be some other kind if security.

I'm especially interested, because I believe the buyers of these securities are the weak links. The coupons are too low for the risks attached to these securities. 75% LTV is not nearly enough for these tiny yields.

There are some specialist funds that buy / hold them and, I guess, pension funds and similar institutions.

They get quite complex quite quickly and there are many derivatives from them AIUI

Just wade through this article for example and see how much of it would make sense to most people

http://www.investmentweek.co.uk/investment-week/feature/2372237/could-we-soon-see-the-return-of-mbs

[Neverwhere]

Virgin Money slows down buy-to-let lending - The Times

Virgin Money reined in buy-to-let - Mortgage Introducer

Virgin Money reined in buy-to-let

Virgin Money reined in its buy-to-let lending in 2015 because it feared the consequences of contributing to a potentially overheated market, the bank’s chief executive Jayne-Anne Gadhia has said.

In the wake of the release of Virgin's Q3 2015 results, which revealed that the bank upped its gross lending by 38% year-on-year, she admitted Virgin acted to curb a market which made up 28% of its total new mortgage lending earlier in the year.

Gadhia said: "We have pulled back a little bit on Buy-to-let… because we don't want to get overheated there."

To slow down its new buy-to-let lending the bank adjusted its pricing on new business, as Richard Hemsley, Virgin Money's chief banking officer, said buy-to-let went from representing 28% of total new mortgage lending earlier in the year to 20-23% "more recently".

[pipllman]

propertytribes in conjunction with H D Consultants has launched a new website propertytribesfinancialservices.com

" This website has been designed and built to enable all UK based site visitors (not just Property Tribes members) the opportunity to search live and constantly updated mortgage best buy tables, obtain market leading residential or Buy To Let mortgage quotes and you can even search for appropriate life insurance options online to cover your family, mortgage or business liability requirements. And that's not all, our Advisers can also help with Wills and Trusts and Bridging Loans. Click the tabs / links to get your quotes direct."

edited to remove links

Edited October 17, 2015 by pipllman

[pipllman]

Aldermore is the latest to step up its efforts to win BTL business

http://www.aldermore.co.uk/intermediaries/buy-to-let/key-opportunity/

Including

1 in 5 homes in 2014 we’re owned by a private landlord this number is expected to grow as investors are predicted to buy a further 1 million properties over the next 5 years.

The buy-to-let market is on course to treble between 2012 and 2032, and it is predicted that by this point 1 in 3 properties will be owned by a private landlord.

​This means there’s likely to be more clients considering buy-to-let for the first time, whilst existing landlord clients may be looking to increase their existing portfolios.

[Guest_northshore_*]

http://www.mortgagestrategy.co.uk/b2l-tax-relief-cut-prompts-barclays-to-increase-rental-cover-ratio/

"From 7 December, Barclays’ rental cover ratio will increase from 125 per cent to 135 per cent for all new applications. There will be no other changes to the affordability calculation, with the affordability rate remaining at 5.79 per cent..."