Buy To Let Finance Watch

[spyguy]

1 hour ago, Just_Do_It said:

They won't repossessed just because the current mortgage deal expires.  It'll go to SVR, and only be repossessed if the owner defaults.

Surely any landlord with 20 properties has viable options before repossession?

I think as soon as most go to SVR, the LL will start defaulting.

There's not much in the way of leeway in IO BTLers finances.

 

[Bland Unsight]

1 hour ago, Neverwhere said:

As with Busta's, some of those properties may lack the equity to pay the CGT which would arise on their sale - and there's no reason to think that they would necessarily come up for refinancing in the order most helpful to the BTL landlord, i.e. with lowest CGT liability first and highest CGT liability last - so the sale of one property might conceivably necessitate the sale of other properties in the portfolio, until the equity of the properties sold balanced all of the costs of selling them, or the overall LTV of the portfolio was low enough to allow for more favourable refinancing.

This is a good point.

My first pass at it would be that you're absolutely spot on - there is no reason to believe that the order in which they come up for refinancing will suit the landlord.

If their luck is good they may be able to sell and squirrel away some money for paying down LTV on the portfolio, but if their luck is bad they may have to sell a less encumbered property to cover the CGT on an encumbered property that becomes a loss making investment once they can't refinance.

They can, of course, cover the losses from one with the profits from another but as the loss making property may never 'come good' post-s24 the smarter move may be to quit whilst you're ahead.

 

Edited April 10, 2017 by Bland Unsight

[JDI]

5 hours ago, spyguy said:

I think as soon as most go to SVR, the LL will start defaulting.

There's not much in the way of leeway in IO BTLers finances.

 

If this this the case then these guys must have been cooking the books to refinance anyway.

Surely banks ensure any landlord has enough rent & income to cover some additional costs.

[spyguy]

1 hour ago, Just_Do_It said:

If this this the case then these guys must have been cooking the books to refinance anyway.

Surely banks ensure any landlord has enough rent & income to cover some additional costs.

I see you're new to BTL banking ....

[Pop321]

1 hour ago, Just_Do_It said:

If this this the case then these guys must have been cooking the books to refinance anyway.

Surely banks ensure any landlord has enough rent & income to cover some additional costs.

Surely now. Otterwise dis is awl just crazy.?

Its almost as though the banks are trying to maximise profits for short term gains (say 5 years) and accept the risk for the future. Surely banks aren't that daft, a banking crisis would occur and that something we haven't seen in many years. Oh wait...there was that one bank crisis.

[jiltedjen]

so which banks are most likely to go pop due to the BTL tax changes and non-payments? Nationwide? 

[JDI]

I think others on this forum have mentioned Skipton & Coventry BS for risks.

[spyguy]

44 minutes ago, jiltedjen said:

so which banks are most likely to go pop due to the BTL tax changes and non-payments? Nationwide? 

Nationwide - ran into a burnding building when everyone else was running out.

Skipton - has it own sh1t and other hovered up sh1t.

Coventry BS and other dumb Building societies.

 

 

[Lavalas]

Lots of great insight. Thanks all.

It never ceases to amaze me how little Landlords seem to care about  PRA and the like. PropertyTribes is  usually slightly (but only slightly) more informed than the rest but the sum total of their chat about the portfolio PRA is this 14 post thread from 6 months ago...

http://www.propertytribes.com/showthread.php?tid=127626573&highlight=Pra

Any other chat about it is referenced back to the same 'in depth' thread.

There are so many reasons as to why society needs rid of these people. How can the housing of people be left to whims of such immediate greed. I know this is obvious stuff and I'm preaching to the converted... but Jesus wept.

I cannot wait for PRA to fully kick in. I found it annoying that we had to wait a seemingly unnecessary 18 months between S24 becoming law and it kicking in last week. They could have shaved a year off that. PRA can't come soon enough.

[Bland Unsight]

4 hours ago, spyguy said:

Nationwide - ran into a burnding building when everyone else was running out.

When looking around to see what the lenders have put in the public domain thus far on PRA SS13/16 in general and the treatment of the leveraged portfolio landlords in particular I happened on this Mortgage Solutions article which gives a run down of the major lenders' current practices.

Nationwide's (The Mortgage Works) lending rules are the most pedal-to-the-metal mental. A £5m limit, they don't care how many properties with them that is, and they don't care how much debt or how many properties you have with other lenders. I suspect they may have picked up quite a lot of business from the BTL Masters of the Universe over the last ten years, who will have found it increasingly difficult to place multiple loans with other lenders (BM Solutions has a three property limit on new business, but recall that as per Wallace & Rugg in 2015 they have one customer with 133 loans).

[spyguy]

2 hours ago, Bland Unsight said:

When looking around to see what the lenders have put in the public domain thus far on PRA SS13/16 in general and the treatment of the leveraged portfolio landlords in particular I happened on this Mortgage Solutions article which gives a run down of the major lenders' current practices.

Nationwide's (The Mortgage Works) lending rules are the most pedal-to-the-metal mental. A £5m limit, they don't care how many properties with them that is, and they don't care how much debt or how many properties you have with other lenders. I suspect they may have picked up quite a lot of business from the BTL Masters of the Universe over the last ten years, who will have found it increasingly difficult to place multiple loans with other lenders (BM Solutions has a three property limit on new business, but recall that as per Wallace & Rugg in 2015 they have one customer with 133 loans).

NW smells somewhere between the Co-op (er, we're bust) and Northern Rock (Do you know that magic thing we were doing? We're bust).

[Bland Unsight]

Ipswich Building Society to the rescue!

Quote

From the first of January, the PRA told regulated buy-to-let lenders they must use a stricter measure to assess the affordability of the loan.

However, the PRA has offered a get-out clause for existing landlords shopping around for a new deal. It said, that to avoid existing borrowers being adversely affected when remortgaging, its new affordability rules do not apply if the landlord is not increasing the size of their current mortgage, irrespective of which lender that contract is with.

In January, Mortgage Solutions asked the top six mortgage lenders by market share in 2015, if they would use the mortgage prisoner rules. At the time, only Nationwide had adopted the flexibilities.

Three months on and the position is largely unchanged, with Lloyds Banking Group, NatWest, HSBC and Barclays all still applying a full affordability assessment to pound for pound remortgage borrowers. A spokesperson for Santander said the bank was reviewing the policy and hoped to be in position to come to market very soon.

Stevens said the high street’s reluctance to adopt the PRA’s flexible rule for mortgage prisoners would stem from their status as volume lenders. “When they have to deal with something different it slows them down,” she said.

“Volume lenders tend to use a set methodology to assess applicants. Our smaller size makes us agile. We can identify where there are gaps in support for borrowers and move quickly to fill them.”

Source: Ipswich sees rise in calls from BTL mortgage prisoners, Mortgage Strategy, 11 April 2017

Lloyds Group's BTL book has stopped growing and started shrinking, topping out at £55.6bn at 31 December 2015. Now down to £54.5bn as per the 31 December 2016 annual report. As the bonkers BTL lending spike corresponding with the introduction of the SDLT second property surcharge falls within this period this may be a sign of things to come.

[Ah-so]

4 hours ago, Bland Unsight said:

Ipswich Building Society to the rescue!

Source: Ipswich sees rise in calls from BTL mortgage prisoners, Mortgage Strategy, 11 April 2017

Lloyds Group's BTL book has stopped growing and started shrinking, topping out at £55.6bn at 31 December 2015. Now down to £54.5bn as per the 31 December 2016 annual report. As the bonkers BTL lending spike corresponding with the introduction of the SDLT second property surcharge falls within this period this may be a sign of things to come.

The big players know that if they take on a BTL borrower affected by the new rules, they will have worse cash flows and this will impact the probably of them defaulting. They would need to take this into account when offering a loan and considering the capital to be held against them.

The simpletons at Ipswich BS are effectively agreeing to lower their minimum interest coverage ratio from 125% to 105% once the tax is taken into account. If IBS are happy to do that, they are fools. It is no coincidence they share their initials with rectal discomfort.

[Sancho Panza]

1 hour ago, Ah-so said:

The big players know that if they take on a BTL borrower affected by the new rules, they will have worse cash flows and this will impact the probably of them defaulting. They would need to take this into account when offering a loan and considering the capital to be held against them.

The simpletons at Ipswich BS are effectively agreeing to lower their minimum interest coverage ratio from 125% to 105% once the tax is taken into account. If IBS are happy to do that, they are fools. It is no coincidence they share their initials with rectal discomfort.

Can't imagine how this might go wrong apart from the LL being on the receiving end of a one month void.

[Ah-so]

Great spreadsheet BTW, Bland. 

And good quality data governance - the design style is very reminiscent of best practice described on a course I took on Excel some years ago. 

[AvoidDebt]

Buy to let investors target smaller cheaper properties

https://www.lettingagenttoday.co.uk/breaking-news/2017/4/buy-to-let-investors-target-smaller-cheaper-properties

[Bland Unsight]

4 hours ago, Ah-so said:

Great spreadsheet BTW, Bland. 

And good quality data governance - the design style is very reminiscent of best practice described on a course I took on Excel some years ago. 

Thanks.

I slipped from best practice on the line that calculates the personal allowance so if you're using it a year from now and the band for the additional tax rate shifts, the affected rows will need a tweak. I may spoil fellow BTL Finance Watch lurkers and posters with an update at that stage! 

[Bland Unsight]

3 hours ago, AvoidDebt said:

Buy to let investors target smaller cheaper properties

https://www.lettingagenttoday.co.uk/breaking-news/2017/4/buy-to-let-investors-target-smaller-cheaper-properties

From the link:

Quote

The quarter also saw the balance of the buy to let mortgage market shift away from remortgaging - a dominant force until recently - and strongly towards purchases.

Now if BTL lending for approval volumes are still flat lining, that may really be saying that remortgage volumes are now falling. As BTL rates are still falling and are considerably lower than they were two years ago that means that people due for remortgaging are not remortgaging onto cheaper rates to the extent that they were previously. Why not? Possibly because they can't as they don't meet the tighter underwriting rules?

We'll need to wait for at least a couple of quarters of data, but could be that the stalling in remortgage volumes that occurred a bit mysteriously in August 2015 (anybody recall anything happening in July 2015?) might be about to find reverse gear. (We'll set aside the issue of the pointlessness of engaging reverse whilst stalled.)

Source of data: CML

Edited April 12, 2017 by Bland Unsight

[Exiled Canadian]

5 hours ago, Bland Unsight said:

From the link:

Now if BTL lending for approval volumes are still flat lining, that may really be saying that remortgage volumes are now falling. As BTL rates are still falling and are considerably lower than they were two years ago that means that people due for remortgaging are not remortgaging onto cheaper rates to the extent that they were previously. Why not? Possibly because they can't as they don't meet the tighter underwriting rules?

We'll need to wait for at least a couple of quarters of data, but could be that the stalling in remortgage volumes that occurred a bit mysteriously in August 2015 (anybody recall anything happening in July 2015?) might be about to find reverse gear. (We'll set aside the issue of the pointlessness of engaging reverse whilst stalled.)

Source of data: CML

Or because they plan to sell due to S24 and don't want to face the early redemption penalties from a new mortgage deal when they do?

[Bland Unsight]

50 minutes ago, Exiled Canadian said:

Or because they plan to sell due to S24 and don't want to face the early redemption penalties from a new mortgage deal when they do?

Good point. I think the surmise that any dip in prices will call forth BTL investors wishing to sell up remains reasonable. 

[Pop321]

1 hour ago, Exiled Canadian said:

Or because they plan to sell due to S24 and don't want to face the early redemption penalties from a new mortgage deal when they do?

I think you may have identified one potential reason...spot on. 

I am deciding whether to cash in my Santandar, Club Lloyds, premium bonds, ISAs etc and pay debts off or go on new rates. I decided to ring a lender today (my 2nd highest pay rate) of 2.99% to see the options. Nottingham BS use an IFA service but allow existing members direct rates. Best on offer with them was around 3.4%, but they kept mentioning their IFA service clearly looking to remove my debt? . But my first consideration was a you mention....was are there any early repayment issues because if there are I will pay the debt off. A 118'er may well be thinking the same in terms of tying into a new deal with clauses when they may need to sell in the next year or so. 

I still have 4 months left on mine so will stick for now....but there are no penalties. The SVR is 6.2% so clearly the are encouraging action and it will be interesting to see the options and process involved. 

Unfortunately for research purposes I may not get much info because I am likely to repay...but I will get a feel of any obstacles in the way and let you know. 

[SE10]

16 hours ago, Ah-so said:

Great spreadsheet BTW, Bland. 

And good quality data governance - the design style is very reminiscent of best practice described on a course I took on Excel some years ago. 

Seconded.

Also, I pity the fool that becomes a portfolio LL where I live...

[Bland Unsight]

2 hours ago, SE10 said:

Seconded.

Also, I pity the fool that becomes a portfolio LL where I live...

Exactly.

There is detail.  Not all leveraged bets on houses are created equal. Section 24 changes the game for anyone using leverage. Do they all understand that already? I doubt it. Will they all understand it in the fullness of time? I guarantee it.

[hi5lo5]

https://www.lettingagenttoday.co.uk/breaking-news/2017/4/major-lender-lowers-affordability-assessments-for-buy-to-let

One of the biggest lenders to the buy to let community, Santander, is to lower its affordability assessments from next Wednesday.

It will use an assessment of 125 per cent rental cover over monthly mortgage payments, and a five per cent affordability rate for buy to let remortgage applications where no increase in borrowing is required.

The bank says this should mean that borrowers already with a buy to let mortgage arranged prior to the new Prudential Regulation Authority guidelines coming into effect - requiring stricter lending criteria - should not be adversely affected if they then remortgage. 

[Lavalas]

Of interest?

www.propertytribes.com/showthread.php?tid=127627442&action=lastpost&type=user&lid=287465

Just been turned down on 2 remortgage applications due to having too many properties. It appears that most lenders are now imposing a maximum number of properties of around 10.  A few are still okay for portfolio landlords but rates are far worse.  Best I've been offered is 3.35% on a 65% LTV and I have 999 credit score.