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non frog

Is Buy To Let Now Too Big To Fail

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A discussion on the way to work this morning with the other half raised an interesting point. Is BTL now too big to fail? Just like the banks. When house prices "correct" and interest rates rise will HMG come to the rescue of all the Telegraph and Mail readers with their 2 house portfolio? A lot of votes in this I suspect. The chancellor might well have taxed the big players, but the votes volume is (I think) the "amateur" that fancy themselves as a player. The sort that often think we tenants owe them a living and shouldn't complain about the wallpaper peeling off the damp in the kitchen or the letter box lid falling off after 20 years of junk mail going through it.

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A discussion on the way to work this morning with the other half raised an interesting point. Is BTL now too big to fail? Just like the banks. When house prices "correct" and interest rates rise will HMG come to the rescue of all the Telegraph and Mail readers with their 2 house portfolio? A lot of votes in this I suspect. The chancellor might well have taxed the big players, but the votes volume is (I think) the "amateur" that fancy themselves as a player. The sort that often think we tenants owe them a living and shouldn't complain about the wallpaper peeling off the damp in the kitchen or the letter box lid falling off after 20 years of junk mail going through it.

straight answer is...NO

with the present system, there would be "incentives" put in place for larger companies to absorb distressed small fry who can't pay the bills.

would be ok for larger "association" type companies with several hundred properties on the books.

they can aqcuire more property at knockdown prices, and have the collateral/accountants to serve as a sufficient guarantee on a loan for further aqcuisitions......and they will get a better rate from the banks than a retail investor.

but for your average BTL,with say 5 or 10 flats who watched too much kirsty+phil, they are toast, to put it bluntly.

Edited by oracle

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A discussion on the way to work this morning with the other half raised an interesting point. Is BTL now too big to fail? Just like the banks. When house prices "correct" and interest rates rise will HMG come to the rescue of all the Telegraph and Mail readers with their 2 house portfolio? A lot of votes in this I suspect. The chancellor might well have taxed the big players, but the votes volume is (I think) the "amateur" that fancy themselves as a player. The sort that often think we tenants owe them a living and shouldn't complain about the wallpaper peeling off the damp in the kitchen or the letter box lid falling off after 20 years of junk mail going through it.

You're right, there are a lot of votes, but most of them are true blue anyway. It's hard to see how the HMG could intervene in such a targetted manner anyway when they only have fairly blunt instruments to play with, and with QE, HTB and FLS already shot, they are fairly out of ammunition. Besides, I think we have reached a point where more voters would benefit from a correction.

Either way, the rhetoric coming from the government, the treasury, and the BOE, suggests they are determined to see an end to current levels of BTL. The Too Big to Fail argument seems just another version of It's Different This Time. Fear not!

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Nothing wrong with buy with your own money to let......the bigger problem is buy with high leveraged debt to rent......those days are numbered....

You can't make thousands from others with nought without having nought yourself.

Edited by winkie

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No, not at all - although that doesn't mean its not going to get messy when it all goes horribly wrong. Those who've treated houses as investments will find out they're just like other investments - the investment only works if you buy it at the right time & in the right circumstances, and if you get burned by ignoring that rule there'll always be someone to take your failed investment off your hands cheaply.

Caveat emptor for those who buy high priced investments with borrowed money.....

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Is BTL now too big to fail?

No.

About twenty million households, about 2 million BTL mortgages probably backed by around 1 million of the 20 million households. Some with very little leverage, some with lots.

Also at 20% of outstanding mortgages even if the banks took a 20% loss on half the existing £200bn, that would be £20bn. That's roughly the size of the PPI payouts.

It's the opposite of too big to fail, it's rich and dumb enough to bail. The BTL borrowers are providing a bail in. The can only do so because they are rich enough to furnish the deposit and have equity in their own homes and good earnings (this is the bail in money). They have only done so because they are the dumb money.

They are not going to be bailed out. Their wealth is the foam on the runway for the banks.

Edited by Bland Unsight

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The kubler-ross grief model goes through 5 stages

denial, anger, bargaining, depression and acceptance

This thread describes some people who are at the bargaining stage

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