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jiltedjen

Nationwide Cracks Down On Btl

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It is s massive response to the tax changes. Volumes will fall sharply. It will also remove options for the more leveraged landlords and the other lenders will either turn borrowers away or increase their lending rates.

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Well we of course new it was coming, but its nice that its out in the MSM.

Are the restrictions tight enough to comply with the upcoming changes that are in the consultation stage or will we see NW etc tightening further come July? (would link if I had more time... sorry).

Edited by My Name Is ??

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Yes.

Ah - sadly not, there is a small mention at the bottom of the Telegraph article:

Existing customers of The Mortgage Works will not be affected by the change if they remortgage, as long as no extra borrowing is involved.

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145% cover ratio at 4.99% actually makes new entry BTL unviable in large areas of the country

Locally 2 bed terraces go for around £180-£200k. In a nearby cheaper area it's more like £140k

at £180k, 75% LTV, the rent would need to be £813/month, £200 more than the going rate.

in the cheaper area it would still be £633, and rents there are lower too.

I would imagine London and the SE, with their sub 2% yields, will be most affected.

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Ah - sadly not, there is a small mention at the bottom of the Telegraph article:

Existing customers of The Mortgage Works will not be affected by the change if they remortgage, as long as no extra borrowing is involved.

I will eat my hat if NW don`t see this as a chance to hike the IR for those remortgaging to reflect the risk ...

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As I said in the other thread, recent changes have applied/will apply a brake to wannabe BTLers, however, pre2001 BTLers bought their hovels as cheap as chips. As such, they have a greater holding power both for rental and sales. Very shrewd, cunning plan is needed to get these ones to sell their cash cows. Don't know who will bring and what that plan will be or else status quo continues?

On a positive note, this may be just the start, those higher up the pyramid may have their eyes on BTL cash machine and have probably thought of ways to redirect it.

Edited by Fairyland

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A mutual should never be lending its members' money to landlords to snap up the existing housing anyway. Literally, turning their members into rent slaves over time.

They just think about their own pathetic pay and bonuses. They need to think more widely and get a conscience, get back to what they were established for in the first place. Helping members buy their own homes.

Nationwide and all the mutuals doing this are a f*cking disgrace.

EDIT: I refer you to this disgusting idiocy where they stated they would rather lend to landlords than first time buyers....

http://citywire.co.uk/money/why-nationwide-prefers-buy-to-let-landlords-to-first-time-buyers/a489252

Why Nationwide prefers buy-to-let landlords to first-time buyers

342104-System__Resources__Image-356923.j

5 years to the day after that article was published, they are finally waking up. They have played a big part in degrading the social and economic fabric of the nation in the intervening half decade.

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As I said in the other thread, recent changes have applied/will apply a brake to wannabe BTLers, however, pre2001 BTLers bought their hovels as cheap as chips. As such, they have a greater holding power both for rental and sales. Very shrewd, cunning plan is needed to get these ones to sell their cash cows. Don't know who will bring and what that plan will be or else status quo continues?

On a positive note, this may be just the start, those higher up the pyramid may have their eyes on BTL cash machine and have probably thought of ways to redirect it.

But how many actually stopped buying?

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145% cover ratio at 4.99% actually makes new entry BTL unviable in large areas of the country

Locally 2 bed terraces go for around £180-£200k. In a nearby cheaper area it's more like £140k

at £180k, 75% LTV, the rent would need to be £813/month, £200 more than the going rate.

in the cheaper area it would still be £633, and rents there are lower too.

I would imagine London and the SE, with their sub 2% yields, will be most affected.

Yup. Nationwide's changes take effect from 11th May. Plenty of time for others to follow suit, and hopefully they will.

A very pleasant April surprise. It was to be expected eventually, but having a major player getting in well ahead of the rest is great news.

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Ah - sadly not, there is a small mention at the bottom of the Telegraph article:

They won't be able to so easily move to a new mortgage provider - so the existing provider won't feel so motivated to offer a good rate...

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Well we of course new it was coming, but its nice that its out in the MSM.

Are the restrictions tight enough to comply with the upcoming changes that are in the consultation stage or will we see NW etc tightening further come July? (would link if I had more time... sorry).

As best as I understand matters, if the PRA rules that are presently out for consultation are implemented in their current form, and there is every reason to believe they will be, then the lenders will have to throw out the present industry standard rental cover rules entirely and replace them with what we might call net cash flow before interest rules.

I think that the net cash flow before interest which is broadly equivalent to a 145% rental cover will depend a great deal on the property and the details of the borrower, (for example, whether or not they are a higher rate tax payer facing the Clause 24 restriction of deduction of mortgage interest for calculating tax).

If you were a higher rate tax payer, and you planned to use a managing agent and the property had significant service charges, I suspect the rental cover which delivers the required net cash flow before interest will be considerably more than 145%, possibly north of 170%.

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They won't be able to so easily move to a new mortgage provider - so the existing provider won't feel so motivated to offer a good rate...

To quote Mr Geldoff and his esteemed Boomtown Rats - "It's a rat trap.....and you've been caught"

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If you were a higher rate tax payer, and you planned to use a managing agent and the property had significant service charges, I suspect the rental cover which delivers the required net cash flow before interest will be considerably more than 145%, possibly north of 170%.

Excellent! So likely NW are going to clamp down even more once the proposals in the consultation come in to force for these high cost BTLers. Makes you wonder why they would make these changes now if this is not in line with the proposals. Boiling their frogs slowly maybe?

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Excellent! So likely NW are going to clamp down even more once the proposals in the consultation come in to force for these high cost BTLers. Makes you wonder why they would make these changes now if this is not in line with the proposals. Boiling their frogs slowly maybe?

As I calculated here, if the BCBS risk-weights come through red in tooth and claw, then at first glance it appears that were Nationwide to do too much BTL, then they'd need to raise capital, or issue subordinated debt. It's not 2005. Nationwide can't just securitise the crap off the balance sheet and pretend that they've transferred the risk to somebody who has an appetite for it.

As we've previously discussed times many, BTL is under attack from the Treasury (via SDLT and Section 24 of the Finance Act (No.2) 2015), the Bank of England (via the PRA BTL underwriting review) and from the Bank of England indirectly (via the BCBS risk-weights). I think that trying to intuit the motivation behind the lenders' decisions from the outside, with so much up in the air, is a bit of a fool's errand. However, the direction of travel is pretty interesting. :D

Edited by Ghost Bird

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BTL bubble requires new entrants.

No new entrants and the bubble turns to bust.

Won't be as drastic as current BTL bailing out straight away, but it doesn't need to be that drastic.

Next year will be fun!

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