Jump to content
House Price Crash Forum
Fairyland

Better Late Than Never : George Osborne Unveils Curbs On Buy-To-Let Mortgages

Recommended Posts

DT:

George Osborne unveils curbs on buy-to-let mortgages

George Osborne has announced plans that could make it more difficult for hundreds of thousands of people to become buy-to-let landlords.

"We have given the FPC powerful tools to tighten mortgage standards if they feel there’s a credit bubble developing"
George Osborne

In a surprise announcement, the Chancellor indicated that he is planning to give tough new powers to the Bank of England to regulate buy-to-let mortgages.

The Bank, which is led by Mark Carney, has warned that the buy-to-let mortgage market poses a threat to Britain’s economic recovery.

ADVERTISING

Mr Carney had previously asked for the Bank to be given “additional powers” over buy-to-let mortgages.

The Treasury had said it would consult on whether to give the Bank new powers over the market.

Peers will 'have wings clipped' if they block tax credit cuts

However, appearing before the Treasury select committee yesterday, Mr Osborne said he had “granted those powers” to the Bank.

Last year, the Bank’s financial policy committee (FPC) introduced regulations designed to prevent the housing market from overheating.

George Osborne needs to stick with cuts to tax credits, but slash tax for the lowest-paid

Banks must now ensure no more than 15 per cent of residential mortgages are given to people borrowing more than 4.5 times their income and are also required to “stress test” borrowers’ ability to repay loans.

These rules do not cover buy-to-let mortgages, which account for a sixth of the market. It is thought the Bank could change the rules to ensure that buy-to-let mortgages are covered

.George Osborne: no climbdown on challenger bank tax

Speaking to MPs, Mr Osborne said: “I take the Governor’s view very seriously. We have given the FPC powerful tools to tighten mortgage standards if they feel there’s a credit bubble developing.

"The Governor of the bank and the FPC have asked for additional powers over buy-to-let mortgages, which weren’t included. We have granted those powers so that they have that tool as well.”

Share this post


Link to post
Share on other sites

Well yes, the BoE has done such a marvellous job of hitting its primary target - 2% inflation - in the last 21 months (missed it by an increasing margin every month), that we should surely expect it to excel in its wider brief

I will reserve judgment until i) the power are actually vested ii) something is deployed and iii) on the basis of the results delivered

Share this post


Link to post
Share on other sites

Question: How will this affect BTL remortgaging? More grief?

It seems likely. One of the main things that the Bank introduced for owner occupiers was a requirement for a repayment plan other than the sale of the property, which effectively shutdown interest only lending for this sector of the market. If they do the same for buy-to-let then there will be many who will be unable to remortgage off of their current deals.

Share this post


Link to post
Share on other sites

a lot depends on how quickly anything changes

arguably Basel III does the job anyway (and is implemented 2017)

if the BoE gets the mooted powers sooner and implements any resultant changes into the market quickly, then the BTL debt landscape could change to the detriment of the high leverage model

Share this post


Link to post
Share on other sites

It seems likely. One of the main things that the Bank introduced for owner occupiers was a requirement for a repayment plan other than the sale of the property, which effectively shutdown interest only lending for this sector of the market. If they do the same for buy-to-let then there will be many who will be unable to remortgage off of their current deals.

They've had enough f#cking second chances to exit ffs.

Share this post


Link to post
Share on other sites

There never was a bubble in house prices by any measure the BoE used.

There still isnt.

They measure economic activity...a bubble would show a large increase in instability in BTL borrowers.

therefore, none exists, as measures are in place to prop up that stability, therefore, it needs no attention.

Share this post


Link to post
Share on other sites

It seems likely. One of the main things that the Bank introduced for owner occupiers was a requirement for a repayment plan other than the sale of the property, which effectively shutdown interest only lending for this sector of the market. If they do the same for buy-to-let then there will be many who will be unable to remortgage off of their current deals.

I think this is the really important point. If stricter affordability measures are introduced for BTL then not only will that prevent some future entrants, it will royally screw many who already hold mortgages. Most will be on introductory deals (fixed or otherwise) because that is just the way the mortgage market is structured these days (to get you to remortgage and pay fees on a regular basis, I guess). If you find that you can't remortgage, for whatever reason (e.g. new constraints) then you go on to the SVR and you are stuffed. BTL SVRs are somewhere in the mid 5's today and could well be significantly higher within a few years (Basel etc). That's going to turn a marginal "investment" into a nightmare.

Share this post


Link to post
Share on other sites

Trouble is, the stupid BoE/FPC labour under the opinion that buy-to-let lending is 'safer' than first time buyers because it puts experienced borrowers between bank lending and the mortgage.

They don't think about the total costs to the system and society, the cultivation of the 'homeowning democracy' etc. They are there to protect banks. Nothing else. They would consider anything else such as the effects of their policies on wealth distribution as way outside their remit, yet they are the main culprits.

I don't think this is the case currently. From the Bank fo England's July 2015 Financial Stability Report:

Buy-to-let lending could pose a risk to financial stability.

The actions of buy-to-let investors affect the broader housing and mortgage markets as individuals compete to buy the same pool of properties. Looser lending standards in the buy-to-let sector could contribute to general house price increases and a broader increase in household indebtedness. And in a downswing, investors selling buy-to-let properties into an illiquid market could amplify falls in house prices, potentially raising losses given default for all mortgages. This could be a particular concern in a rising interest rate environment, if properties become unprofitable given higher debt-servicing costs. Buy-to-let borrowers are potentially more vulnerable to rising interest rates because loans are more likely to be interest only and extended on floating-rate terms, and affordability tends to be tested at lower stressed interest rates than owner-occupied lending.

Edited by Neverwhere

Share this post


Link to post
Share on other sites

"We have given the FPC powerful tools to tighten mortgage standards if they feel there’s a credit bubble developing"

George Osborne

IF? IF George? Really? What about doing something about the damage caused by the current one? What an idiot.

Share this post


Link to post
Share on other sites

Well yes, the BoE has done such a marvellous job of hitting its primary target - 2% inflation - in the last 21 months (missed it by an increasing margin every month), that we should surely expect it to excel in its wider brief

I will reserve judgment until i) the power are actually vested ii) something is deployed and iii) on the basis of the results delivered

Despite the fact that Carney is clearly a patsy and was brought in on a brief of not raising interest rates, he has been surprisingly vocal and effecrive when it comes to housing market and macro prudential issues etc. Compared to his peer central bankers in over indebted western economies he actually is best of a bad bunch. Anyway worth noting re the criticism of missing the inflation target:

1) The inflation target is a nonsense, and if they miss it on the downside that is good for most normal people on the street.

2) They have pent up inflation in the over-valued pound.

Share this post


Link to post
Share on other sites

a lot depends on how quickly anything changes

arguably Basel III does the job anyway (and is implemented 2017)

if the BoE gets the mooted powers sooner and implements any resultant changes into the market quickly, then the BTL debt landscape could change to the detriment of the high leverage model

I think Osborne did mention an intention for the Bank to have these powers sooner rather than later at the Treasury Committee yesterday.

Share this post


Link to post
Share on other sites

They've had enough f#cking second chances to exit ffs.

I think this is the really important point. If stricter affordability measures are introduced for BTL then not only will that prevent some future entrants, it will royally screw many who already hold mortgages. Most will be on introductory deals (fixed or otherwise) because that is just the way the mortgage market is structured these days (to get you to remortgage and pay fees on a regular basis, I guess). If you find that you can't remortgage, for whatever reason (e.g. new constraints) then you go on to the SVR and you are stuffed. BTL SVRs are somewhere in the mid 5's today and could well be significantly higher within a few years (Basel etc). That's going to turn a marginal "investment" into a nightmare.

The writing is very clearly on the wall with everything that's coming down the line. Sell now, sell everything ;)

Share this post


Link to post
Share on other sites

Despite the fact that Carney is clearly a patsy and was brought in on a brief of not raising interest rates, he has been surprisingly vocal and effecrive when it comes to housing market and macro prudential issues etc. Compared to his peer central bankers in over indebted western economies he actually is best of a bad bunch. Anyway worth noting re the criticism of missing the inflation target:

1) The inflation target is a nonsense, and if they miss it on the downside that is good for most normal people on the street.

2) They have pent up inflation in the over-valued pound.

You could be right, but you and I both know that if inflation had been steady at 2% (or anywhere near) for any of the last 21 months, it would have been shouted from the roof tops as a glorious success.

That it isn't anywhere close and has actually got further away from the target, despite the best efforts of everyone involved to manipulate it, shows that it was either an impossible target or that the bank has been ineffective (maybe due to political pressure) in achieving its stated goal

In my book it (the BoE) has a lot to prove before I could judge it as credible

Share this post


Link to post
Share on other sites

It getting out of control now. He tries to shift the blame.

However, appearing before the Treasury select committee yesterday, Mr Osborne said he had “granted those powers” to the Bank. Last year, the Bank’s financial policy committee (FPC) introduced regulations designed to prevent the housing market from overheating. These rules do not cover buy-to-let mortgages, which account for a sixth of the market.

We have given the FPC powerful tools to tighten mortgage standards if they feel there’s a credit bubble developing.

And they protect buy-to-let voters by another year to help them win election.

Edited by rollover

Share this post


Link to post
Share on other sites

I know everyone here will say 'Great!' - less lending > lower prices. And I'd agree.

The problem is it's YET MORE INTERVENTION. Thus the market further imbalances.

And there will be unexpected consequences - of which I know not.

Instead what they should do is get the f out of it and let the banks do what the f they want. Then WHEN they go bust let them go bust.

And the BTLers.

THAT is the best regulator. Not a politburo of well meaning bureaucrats.

Share this post


Link to post
Share on other sites

So osbourne is just pre emptively passing the buck in case the BTL fuse sets off the HPC.

But I've not got any hope the fsa will actually recognise this credit bubble. The establishments official line is that there is no bubble so why believe them now. They're ******ed, tighten up now and cause a crash in buy to let which could lead to HPC or just stay on the ride and see how long they can get away with it before tshtf.

Share this post


Link to post
Share on other sites

I know everyone here will say 'Great!' - less lending > lower prices. And I'd agree.

The problem is it's YET MORE INTERVENTION. Thus the market further imbalances.

And there will be unexpected consequences - of which I know not.

Instead what they should do is get the f out of it and let the banks do what the f they want. Then WHEN they go bust let them go bust.

And the BTLers.

THAT is the best regulator. Not a politburo of well meaning bureaucrats.

Imbalances? Markets are living things that almost always operate far from equilibrium. Disequilibrium systems can be quasi-stable for long periods but break down unpredictably when disturbed. Letting parts of the financial system collapse without warning would also have unintended consequences, there's no reason to believe that this would work any better than the present arrangement.

Share this post


Link to post
Share on other sites

Carney has had a look but didn't find a bubble and he said that yes house prices are rising, but from a low level ... they know exactly what is happening and they love HPI especially as they see nothing else has been badly affected. There are no riots, the banks are getting fixed, most people love rising house prices and it benefits GDP and of course HPI has nothing to do with inflation.

Carney is not to blame for it, but he will be. Last year these rules do not cover buy-to-let mortgages.

Share this post


Link to post
Share on other sites

Imbalances? Markets are living things that almost always operate far from equilibrium. Disequilibrium systems can be quasi-stable for long periods but break down unpredictably when disturbed. Letting parts of the financial system collapse without warning would also have unintended consequences, there's no reason to believe that this would work any better than the present arrangement.

+100

Share this post


Link to post
Share on other sites

Trouble is, the stupid BoE/FPC labour under the opinion that buy-to-let lending is 'safer' than first time buyers because it puts experienced borrowers cannon fodder between bank lending and the mortgage.

FTFY :-)

Share this post


Link to post
Share on other sites

Fiddling while Rome burns.

I've been waiting ten years for a chance to buy a decent flat. If BTL has been lined up to take on the liabilities resulting from a crash, then it's past time to kick one off, already.

If the housing crisis persists much longer the current generation of politicians will have lost me completely. Osborne has already spent five years keeping the bubble inflated - not sure whether I can forgive him that.

Share this post


Link to post
Share on other sites

I know everyone here will say 'Great!' - less lending > lower prices. And I'd agree.

The problem is it's YET MORE INTERVENTION. Thus the market further imbalances.

And there will be unexpected consequences - of which I know not.

Instead what they should do is get the f out of it and let the banks do what the f they want. Then WHEN they go bust let them go bust.

And the BTLers.

THAT is the best regulator. Not a politburo of well meaning bureaucrats.

You are making the same mistake that Greenspan made. The bankers don't care if the banks go bust so long as they don't go bust.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • Recently Browsing   0 members

    No registered users viewing this page.

  • Next General Election   90 members have voted

    1. 1. When do you predict the next general election will be held?


      • 2019
      • 2020
      • 2021
      • 2022

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.