Reverse Propaganda - from £600 monthly profit to £200 loss BTL tax bite

[spyguy]

20 hours ago, Freki said:

Can someone else please explain the correlation between central banks IR and government bonds? I am a bit tired.

Its a bit vague/loose and we are no longer in Kansas.

Central bank used rates   to pull money out of the economy.

Bonds are priced at what the auction clears them for.

If I was to guess one of themnay negative outcomes of QE is that the banks have removed a market signal mechanism. Theres no poiht pattipicating with buying bonds unless its to offset some risk in the same currency.

What I expect is that rather than face increasing cost of debt, countries will find themselves unable to borrow money at any price.

In the UKs case Ican see us not beign able to borrow in sterling anymore.

You can make a case for QE for a few quarters. You cannot for multi years - the problem is structural.

[Blod]

15 hours ago, buckers said:

I'm not up to speed, were there IO mortgages offered that were 100% LTV? Or are you saying that you think there's a chance that houses bought using an IO mortgage might not actually fetch 75% or 85% of their purchase price after 25 years? I still don't see where the risk is for the bank compared to (say) a car loan that would warrant a punitive interest rate.

These 'IO' loans weren't marketed as such, the were called endowment mortgages. They were packaged with a savings vehicle (endowment) that could compound over time and then when the IO term ended cover the original loan amount. 

That was the concept, in reality many of these packages could be separated out into the IO element and the savings part in fact that is what happened. People saw the savings part as unnecessary and either failed to keep up payments on it or worse still simple cashed it in. These products were slightly cheaper than a repayment mortgage and meant the people gravitating to them would be at the riskier end of the pool of borrowers. Also they borrowed at a far higher LTV.

I didn't really think this type of lending was an issue however a few months back a couple I know admitted they had a problem with their mortgage. This came out of the blue, turns out they cashed in the endowment and just payed the interest. They 'discovered' this when trying to increase their mortgage for an extension. Apparently the shortfall is ninth thousand. I can't understand why they're being lent more money for building work and also how they could have been allowed to cash in the endowment. Oh well just heard an ad on the radio, the replacement for PPI mis-selling is IO loans.

 

[spyguy]

21 hours ago, Fairyland said:

This sounds very promising. If Its rise then leveraged BTL will be toast.

What about older BTLs? The flats that come up for £450K ish, in West London, zone 3, were bought for £100K ish in the late 90s. I would imagine the BTLer has already paid of the mortgage or a significant chunk of it. Will they come out unscathed ? Mind you IRs were high till 2007 and BTL mortgage is IO. Don't know the exact math. Probably the banks have it. A percentage of affected LLs should summarise this.

Edit: cross posted with spy guy's post above.

Any BTL pre 2000ish will probably be a repayment, so should have paid most of it off and have enough equity in a West London flat after ~20 years.

Unless theyve be withdrawing equity and doubling down on the bet.

I dont know, the banks dont know andthe BoE dont really know. The BoE has only recently trying to get a grip on stuff. The risk of BTL is concentrated in a relative few number of people (10% of UK pop/20% over 50?) carrying a *lot* of debt.

[oracle]

On 02/06/2017 at 11:15 AM, frederico said:

The political parties either don't understand or can't explain the problems caused by low rates. I mean raising rates must be bad right... wrong...

 

they do, but as usual their policies are RE-active, not pro active.Always goes t1ts-up when you have to play catch up