Buy To Let Finance Watch

[Bland Unsight]

13 minutes ago, Dyson Fury said:

According to our friends over at Povertylater, RBS have broken ranks here and declared that their stricter portfolio landlord underwriting criteria will apply to landlords with more than 10 properties, instead of more than 4.

https://www.property118.com/rbs-policy-changes-buy-let-4-10-properties/

I immediately remembered that RBS is still majority owned by the government taxpayers, to the tune of over 70%:

https://investors.rbs.com/share-data/equity-ownership-statistics.aspx

So why is a bank majority-owned by the  government undermining a policy that has been introduced as a direct result of the Bank of England's concerns about BTL??

Anyone who gets their information about buy-to-let mortgage lending from PovertyLater is not choosing wisely.

[Bland Unsight]

2 hours ago, Dyson Fury said:

According to our friends over at Povertylater, RBS have broken ranks here and declared that their stricter portfolio landlord underwriting criteria will apply to landlords with more than 10 properties, instead of more than 4.

https://www.property118.com/rbs-policy-changes-buy-let-4-10-properties/

I immediately remembered that RBS is still majority owned by the government taxpayers, to the tune of over 70%:

https://investors.rbs.com/share-data/equity-ownership-statistics.aspx

So why is a bank majority-owned by the  government undermining a policy that has been introduced as a direct result of the Bank of England's concerns about BTL??

Mate, you're even misrepresenting the PovertyLater piece. There's nothing in it which can be summarised by saying "that their stricter portfolio landlord underwriting criteria will apply to landlords with more than 10 properties, instead of more than 4" as you choose to.

The PRA rules allow lenders to make as many loans to BTL muppets as they wish but it just imposes some credit underwriting obligations on the bank if they choose to lend to anyone with four or more mortgages. The reason that RBS is reviewing its initial reaction to PRA SS13/16 is presumably the same as it is for all the other banks; BTL lending was a real money spinner and lending volumes are cratering. They're not breaking any of the new rules.

Part of me suspects that some of the banks are genuinely surprised to learn that 40% of their lending BTL business is with the portfolio muppets. The banks may have thought that cutting off the portfolio muppets wouldn't unduly impact their lending volumes and now they're finding out that it has a massive effect on their lending business.

Edited March 20, 2018 by Beary McBearface

[Dyson Fury]

28 minutes ago, Beary McBearface said:

Anyone who gets their information about buy-to-let mortgage lending from PovertyLater is not choosing wisely.

Fair comment. I tried to check whether or not their claim is true, but I found the RBS website difficult to navigate.  I did find this link aimed at mortgage intermediaries:

https://rbsip.com/Lending_Criteria/General_guidelines_for_B2L_Mortgages.html

which says:

Quote

We define a portfolio landlord as a customer who has four or more properties owned solely, jointly or in aggregate across all applicants ...

but also:

Quote

The maximum number of Buy-to-let properties your client can have is ten.

So, probably, the whole thing is a misunderstanding by the 118ers.  RBS do continue to apply the "4-property" criterion for their portfolio lending, and the actual news is that they have introduced a new restriction, that they will not lend at all to landlords with more than 10 properties.

Edited March 20, 2018 by Dyson Fury

[Neverwhere]

37 minutes ago, Beary McBearface said:

Mate, you're even misrepresenting the PovertyLater piece. There's nothing in it which can be summarised by saying "that their stricter portfolio landlord underwriting criteria will apply to landlords with more than 10 properties, instead of more than 4" as you choose to.

The PRA rules allow lenders to make as many loans to BTL muppets as they wish but it just imposes some credit underwriting obligations on the bank if they choose to lend to anyone with four or more mortgages. The reason that RBS is reviewing its initial reaction to PRA SS13/16 is presumably the same as it is for all the other banks; BTL lending was a real money spinner and lending volumes are cratering. They're not breaking any of the new rules.

Part of me suspects that some of the banks are genuinely surprised to learn that 40% of their lending BTL business is with the portfolio muppets. The banks may have though that cutting off the portfolio muppets wouldn't unduly impact their lending volumes and now they're finding out that it has a massive effect on their lending business.

It does seem to be a simple expansion of the size of portfolio they're willing to lend against.

From RBS's own site (emphasis added):

Quote

Am I eligible for a Buy to let mortgage ?

[. . .]

✔ You must currently own no more than nine Buy to let properties, and your maximum borrowing amount cannot exceed £3.5 million

Possibly going to the trouble of putting systems in place to handle higher underwriting requirements for portfolio landlords "with four or more distinct mortgaged buy-to-let properties" (as per the PRA) isn't very cost effective when you only lend to landlords with a maximum of four properties (which AIUI was RBS's previous maximum)?

Edited March 20, 2018 by Neverwhere

[Ah-so]

16 minutes ago, Beary McBearface said:

Mate, you're even misrepresenting the PovertyLater piece. There's nothing in it which can be summarised by saying "that their stricter portfolio landlord underwriting criteria will apply to landlords with more than 10 properties, instead of more than 4" as you choose to.

The PRA rules allow lenders to make as many loans to BTL muppets as they wish but it just imposes some credit underwriting obligations on the bank if they choose to lend to anyone with four or more mortgages. The reason that RBS is reviewing its initial reaction to PRA SS13/16 is presumably the same as it is for all the other banks; BTL lending was a real money spinner and lending volumes are cratering. They're not breaking any of the new rules.

Part of me suspects that some of the banks are genuinely surprised to learn that 40% of their lending BTL business is with the portfolio muppets. The banks may have though that cutting off the portfolio muppets wouldn't unduly impact their lending volumes and now they're finding out that it has a massive effect on their lending business.

Definitely RBS are not ignoring the regulations they are just prepared to do the extra checks necessary to lend to portfolio landlords.

The overhaul of their underwriting that was required meant that a lot of lenders would not have had time to implement all the changes necessary. And it was more than just that  - mortgage brokers had to be brought up to speed.

And no - I don't think most banks did know what percentage of their lending was to landlords with multiple properties. 

[Dyson Fury]

7 minutes ago, Neverwhere said:

It does seem to be a simple expansion of the size of portfolio they're willing to lend against.

From RBS's own site (emphasis added):

Possibly going to the trouble of putting systems in place to handle higher underwriting requirements for portfolio landlords "with four or more distinct mortgaged buy-to-let properties" (as per the PRA) isn't very cost effective when you only lend to landlords with a maximum of four properties (which AIUI was RBS's previous maximum)?

mmm, I'm not sure there has even been a change.  The most recent webarchive of that page is September 2017, and it has the same text:

Quote

You must currently own no more than nine Buy to let properties, and your maximum borrowing amount cannot exceed £3.5 million

https://web.archive.org/web/20170916091842/http://personal.rbs.co.uk:80/personal/mortgages/buy-to-let.html

[Neverwhere]

2 minutes ago, Dyson Fury said:

mmm, I'm not sure there has even been a change.  The most recent webarchive of that page is September 2017, and it has the same text:

https://web.archive.org/web/20170916091842/http://personal.rbs.co.uk:80/personal/mortgages/buy-to-let.html

I was just going to post something to that effect and also hold my hand up to this as well

32 minutes ago, Beary McBearface said:

Anyone who gets their information about buy-to-let mortgage lending from PovertyLater is not choosing wisely.

 

 

[Bland Unsight]

This is an interesting move by own of the BTL lenders at the racier end of the market:

Quote

One Savings Bank has confirmed it will only lend on residential buy-to-let and commercial properties that achieve an E rating or better on energy performance certificates.

Source: Mortgage Solutions, 21 March 2018 (link)

[Freki]

Any news about lengthening void periods? I've been wondering lately

[Freki]

1 hour ago, TonyJ said:

Are they lengthening?

I am asking, it is an important metric that is not receiving enough updates. But it starts becoming a bit off topic for this thread.

[Bland Unsight]

Moody's have released a report suggesting that in their view post-crisis BTL RMBS will "underperform legacy loans". The Moody's pages require registration and accessing the report requires a subscription. As per the announcement of the report on the Moody's website, the analysis assumes that that UK house prices are approaching a peak or plateau. This bit from the announcement might have well have been written by spyguy:

Quote

Furthermore, post-crisis BTL loans still have high exposures to interest-only (IO) loans. As well as being inherently more risky than traditional amortizing loans, IO loans are especially high risks for post-crisis transactions because their more limited potential for home-price appreciation will likely make it more difficult for those borrowers to refinance.

The Term Funding scheme drawdowns were from 19 September 2016 to 28 February 2018 (link) and IIRC the term of the lending is four years so from now on new additional lending needs to be funded the via 'traditional' channels; retail deposits, wholesale money markets and securitisation. It'll be interesting to see if BTL RMBS transactions pick up as the TFS money back out of the market from September 2020 onwards.

[spyguy]

4 hours ago, Beary McBearface said:

Moody's have released a report suggesting that in their view post-crisis BTL RMBS will "underperform legacy loans". The Moody's pages require registration and accessing the report requires a subscription. As per the announcement of the report on the Moody's website, the analysis assumes that that UK house prices are approaching a peak or plateau. This bit from the announcement might have well have been written by spyguy:

The Term Funding scheme drawdowns were from 19 September 2016 to 28 February 2018 (link) and IIRC the term of the lending is four years so from now on new additional lending needs to be funded the via 'traditional' channels; retail deposits, wholesale money markets and securitisation. It'll be interesting to see if BTL RMBS transactions pick up as the TFS money back out of the market from September 2020 onwards.

IO BTL lenders need to put a number to that 'especially high risk'

The closest equivalent to IO BTL is commercial bridging loans.

A quick google shows the following -

1, These are not household names. Or banks.

2, The APRs are monthly. And compounding.

[Bland Unsight]

 

Quote

And for buy-to let, some 2-year fixed rate purchases have increases of one to 3bps, some 5-year fixed rate purchases have between 6 and 11bps and for some 5-year fixed rate purchases, there’s increases of between 6 and 11bps.

For buy-to-let remortgages there’s selected 2-year fixed rate purchases of increases of between one and 6bps and some 2-year fixed rate remortgages of between 2 and 3bps.

Source: Letting Agent Today, Two major buy to let lenders increase cost of mortgages, 12 April 2018

I guess it might be a slow news day for the Letting Agent Today team, but reporting on a 1 bps rate rise... 

Still, buy-to-let rates heading up is better than buy-to-let rates heading down.

[Confusion of VIs]

On ‎20‎/‎03‎/‎2018 at 8:12 PM, Dyson Fury said:

According to our friends over at Povertylater, RBS have broken ranks here and declared that their stricter portfolio landlord underwriting criteria will apply to landlords with more than 10 properties, instead of more than 4.

https://www.property118.com/rbs-policy-changes-buy-let-4-10-properties/

I immediately remembered that RBS is still majority owned by the government taxpayers, to the tune of over 70%:

https://investors.rbs.com/share-data/equity-ownership-statistics.aspx

So why is a bank majority-owned by the  government undermining a policy that has been introduced as a direct result of the Bank of England's concerns about BTL??

By coincidence, I paid a rare visit to my local RBS branch yesterday and noticed at least half a dozen large posters advertising their BTL mortgages.  

[Houdini]

3 hours ago, Confusion of VIs said:

By coincidence, I paid a rare visit to my local RBS branch yesterday and noticed at least half a dozen large posters advertising their BTL mortgages.  

Give how few people meet the criteria for a residential mortgage if you have money to lend for residential property how else can you lend it.

[Ah-so]

41 minutes ago, Houdini said:

Give how few people meet the criteria for a residential mortgage if you have money to lend for residential property how else can you lend it.

Much harder to meet the BTL Criteria now too. Once it was far easier to get a BTL mortgage than an owner occupier one. 

[Cosmic Apple]

12 minutes ago, Ah-so said:

Much harder to meet the BTL Criteria now too. Once it was far easier to get a BTL mortgage than an owner occupier one. 

But the ones they can lend to have tasty paid for main residencies and decent wages from the 'day job'?

[spyguy]

1 hour ago, Cosmic Apple said:

But the ones they can lend to have tasty paid for main residencies and decent wages from the 'day job'?

Then theyll run into age limits.

You basisally cant get new io btl mortgages anymore.

[Arpeggio]

3 hours ago, Houdini said:

Give how few people meet the criteria for a residential mortgage if you have money to lend for residential property how else can you lend it.

In a similar vein it seems there are more estate agent adverts on TV now than ever, such as for Tepilo. Perhaps things are getting a little desperate.

[Houdini]

10 hours ago, Arpeggio said:

In a similar vein it seems there are more estate agent adverts on TV now than ever, such as for Tepilo. Perhaps things are getting a little desperate.

For the online estate agents Tepilo, purplebricks.... the game is to get big or get out (close down). As the rest of the internet shows there is usually only 1 winner (Amazon, ebay, Facebook, Rightmove). And equally unless you have the audience itself the only way to win is to be as cheap as possible - Tepilo / purplebricks only really do sales as openrent has destroyed the rental market pricing model - their prices aren't online today but from memory it was £100 or so all in to advertise and reference a property.  

[spyguy]

1 hour ago, Houdini said:

For the online estate agents Tepilo, purplebricks.... the game is to get big or get out (close down). As the rest of the internet shows there is usually only 1 winner (Amazon, ebay, Facebook, Rightmove). And equally unless you have the audience itself the only way to win is to be as cheap as possible - Tepilo / purplebricks only really do sales as openrent has destroyed the rental market pricing model - their prices aren't online today but from memory it was £100 or so all in to advertise and reference a property.  

I thought the game was to get the money up front.

In terms of cash flow, its a much better model than Smyth + Hemorrhoids on the high street, who've sunk ~500 into the survey and ads and are hoping for their 2% sometime in the future.

[Arpeggio]

2 hours ago, Houdini said:

For the online estate agents Tepilo, purplebricks.... the game is to get big or get out (close down). As the rest of the internet shows there is usually only 1 winner (Amazon, ebay, Facebook, Rightmove). And equally unless you have the audience itself the only way to win is to be as cheap as possible - Tepilo / purplebricks only really do sales as openrent has destroyed the rental market pricing model - their prices aren't online today but from memory it was £100 or so all in to advertise and reference a property.  

Seems to be £29 - £49 according to their website now. Economies of scale must be ripping through anything non-physical and easily scalable such as this area of online advertising. The more the middle-men disappear the better.

[Houdini]

2 hours ago, spyguy said:

I thought the game was to get the money up front.

In terms of cash flow, its a much better model than Smyth + Hemorrhoids on the high street, who've sunk ~500 into the survey and ads and are hoping for their 2% sometime in the future.

It is but its also a game where there will eventually be a race to the bottom as openrent has already shown.

[Bland Unsight]

Update from UK Finance:

Quote

There were 5,200 new buy-to-let house purchase mortgages completed in the month, some 8.8 per cent fewer than in the same month a year earlier. By value this was £0.7bn of lending in the month, 12.5 per cent down year-on-year.

There were 14,100 new buy-to-let remortgages completed in the month, some 20.5 per cent more than in the same month a year earlier. By value this was £2.2bn of lending in the month, 15.8 per cent more year-on-year.

Source

[Ah-so]

1 hour ago, Beary McBearface said:

Update from UK Finance:

Source

Quote

• There were 25,200 new first-time buyer mortgages completed in February 2018, some 2.4 per cent more than in the same month a year earlier. The £4bn of new lending in the month was 2.6 per cent more year-on-year. The average first-time buyer is 30 with a gross household income of £41,000.

If you do the maths, that means that there were 591 more FTB purchases than a year ago, and 501 fewer BTL than a year ago and I do not think that this is a correlation. Less BTL equals more FTB.