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spyguy

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Is it time to just bang the rents up on the grounds of less mortgage choice equals higher fees equals higher DEBTjunkie costs equals the poor scumbag tenants pay for it yet?

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Magellan specialises in lending to borrowers who have suffered from poor credit in the past as well as offering mortgages to those with complex incomes or who are self-employed.

It is the fourth specialist lender to shut up shop in three months, following the closures of buy-to-let specialist Fleet Mortgages, Secure Trust Bank and Amicus.

Fleet Mortgages, a specialist buy-to-let lender, was forced to close its doors to new lending on 8 January after failing to secure finance from investors to fund any more new loans. 

The previous day, Secure Trust Bank confirmed it would cease offering new mortgages immediately due to 'market pressures...competition intensifying, as evidenced by increasing loan-to-value metrics and lower new lending margins'.

In mid-December, Amicus - a specialist lender offering short-term mortgages to property developers and landlords - was forced to stop all new lending and on 4 January confirmed the business had been put into administration.

Good to see some BTL specialists in there.

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8 hours ago, Neverwhere said:

Good to see some BTL specialists in there.

These are mainly specialist finance houses i.e. selling bonds to fund their lending.

The detail thats missing is - are they struggling to raise finance? Or are their debts going bad.

These type of operations hovered up all the weird and wonderful lending that led up to 2008.

BoE wants 80% of lending to be under 4x LTE with a 20-30% deposit.

Now the interesting thing is where does that leave all those small now only)Building societies who've been outfunded into the weird and wild fringes of lending Nationwide (BTL), Leeds BS (holiday lets).

 

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History rhyming again - major building society trying to expand into this market. Ybs reintroducing IR mortgages I believe through its branches....

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15 hours ago, spyguy said:

The detail thats missing is - are they struggling to raise finance?

It looks like it:

Quote

'Bank funding of specialists is always the first to go belly up - that's what happened at Amicus in December. 

'The next to go is private investor money,' said the source. Both Fleet and Magellan are funded all or partly in this way. 

The UK money markets are also deathly quiet, according to the source.  

'Spreads in the whole market have blown out over the past year with the cost of funds now 50, 60, 70 basis points higher than they were in the first half of last year. 

'A year ago, mortgage backed securities were priced at 65bps over Libor on senior notes. Now it's more like 125bps over Libor. Investor confidence has dropped back to what it was back in 2007/8.' 

 

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9 hours ago, Neverwhere said:

It looks like it:

 

AFAICT BTL lending  esp. IO BTL is being moved from the banks to the specialist finance houses.

My response to the BTLers I know when they talk about who theyve re-mortgaged with is normally - 'Who?'

 

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14 hours ago, spyguy said:

AFAICT BTL lending  esp. IO BTL is being moved from the banks to the specialist finance houses.

My response to the BTLers I know when they talk about who theyve re-mortgaged with is normally - 'Who?'

I generally think of BTLers as broadly splitting into two categories:

  • Prime (from the banks' perspective) borrowers who have significant other assets and/or income for the banks to go after, relative to their debts, so they could potentially lose a great deal themselves but their lenders would still be made whole.
  • Subprime borrowers who have no hope at all of meeting the slightest shortfall with other assets or income, either because they have very little of either, or because they have borrowed such wildly large amounts that it completely dwarfs what they do have.

I suspect mainstream lenders will be looking to hold onto the first group whilst avoiding or offloading the second.

Having to finance with a specialist lender should be a warning sign to a BTLer that they're at the riskier end of the market. However, crucially, BTLers who find that they're deemed to pose little risk to mainstream lenders should not necessarily take any personal comfort from this fact, as it may simply mean that they have much more to lose than the equity in their BTL investments.

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8 hours ago, Neverwhere said:

I generally think of BTLers as broadly splitting into two categories:

  • Prime (from the banks' perspective) borrowers who have significant other assets and/or income for the banks to go after, relative to their debts, so they could potentially lose a great deal themselves but their lenders would still be made whole.
  • Subprime borrowers who have no hope at all of meeting the slightest shortfall with other assets or income, either because they have very little of either, or because they have borrowed such wildly large amounts that it completely dwarfs what they do have.

I suspect mainstream lenders will be looking to hold onto the first group whilst avoiding or offloading the second.

Having to finance with a specialist lender should be a warning sign to a BTLer that they're at the riskier end of the market. However, crucially, BTLers who find that they're deemed to pose little risk to mainstream lenders should not necessarily take any personal comfort from this fact, as it may simply mean that they have much more to lose than the equity in their BTL investments.

Indeed.

The first group only emerged after 2014ish - One house, backed with equity from the OO. One of their kids shoved in, as head tenant. Most of these could, at a push, service the mortgage of an empty BTL.

However .... they still risk the move of IO BTL to specialist finance companies. This will see their monthly costs rise. A lot

'Oh Geoff, I dont think that BTL is wishing its face anymore ... Lets sell it ...'

Second lot, the majority, should have never been lent the money. These are the idiots with 3+ IO BTL, equity cascaded into subsequent houses. Tiny cash surplus when the BTL is occupied..

AFAICT lending has long stopped to these loons. And they make up the majority of IO BTL 2002-2017ish.

Whta appears to be happening is each time they re-mrotgage - and these people cannot afford the SVR rates (all of +2%) is that bank or whatever asks for more equity. One idiot I know has gone from 90% LTV to 40%, chasing the 'cheap' remortgage deals. First remortgage went OK, the next wanted 80%, then the next wanted loan under 60%.

Its hilarious. The idiot has not grasped whats happening.

He's remortgaging to make sure the mortgage  does not cost more than the rent. Hes shoved another 100k on his OO mortgage. All the equity over the last 20 years is being sucked into the BTL.

Of course, hes a lucky one- just one BTL.

 

 

 

 

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6 hours ago, spyguy said:

AFAICT lending has long stopped to these loons. And they make up the majority of IO BTL 2002-2017ish.

Whta appears to be happening is each time they re-mrotgage - and these people cannot afford the SVR rates (all of +2%) is that bank or whatever asks for more equity. One idiot I know has gone from 90% LTV to 40%, chasing the 'cheap' remortgage deals. First remortgage went OK, the next wanted 80%, then the next wanted loan under 60%.

Its hilarious. The idiot has not grasped whats happening.

He's remortgaging to make sure the mortgage  does not cost more than the rent. Hes shoved another 100k on his OO mortgage. All the equity over the last 20 years is being sucked into the BTL.

That is a properly bonkers response to what are in effect repeated margin calls!

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6 hours ago, spyguy said:

Indeed.

The first group only emerged after 2014ish - One house, backed with equity from the OO. One of their kids shoved in, as head tenant. Most of these could, at a push, service the mortgage of an empty BTL.

However .... they still risk the move of IO BTL to specialist finance companies. This will see their monthly costs rise. A lot

'Oh Geoff, I dont think that BTL is wishing its face anymore ... Lets sell it ...'

Likely to be higher rate taxpayers as well, so the profitability of their BTLs will be more impacted by the ongoing tax changes.

(As above, just because their lenders will be fine does not mean that they will be.)

6 hours ago, spyguy said:

Second lot, the majority, should have never been lent the money. These are the idiots with 3+ IO BTL, equity cascaded into subsequent houses. Tiny cash surplus when the BTL is occupied..

AFAICT lending has long stopped to these loons. And they make up the majority of IO BTL 2002-2017ish.

The PRA forcing lenders to assess portfolio landlords' entire borrowings is really killer for those who have used continual refinancing to fuel portfolio expansion.

It's a pity that they have yet to force lenders to take existing CGT liabilities into account on revaluation, but there's ample scope for this to be introduced later down the line once it becomes clear - via portfolio landlord bankruptcies - that lending practices to date have allowed BTLers to get themselves into situations where they lack the equity to pay their CGT. 

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2 hours ago, Neverwhere said:

That is a properly bonkers response to what are in effect repeated margin calls!

One of Mrs Spy friends, from kids play group.

We go there for the drinks (not my idea) about once a year - for kiddy catch up.

They always bring up 'the rental property' update on their tenants  - whove theyve been incredibly lucky with in not having a void.

Apparently we are 'cash rich'   Where as Mr + Mrs BTL: are 'asset rich'.

When they entered BTL they had a ~250k (probably less now) house / 50k  mortgage and 1 work DB pension. Mr BTL does not have a pension as hes a trades man magic get out - Oh, hes a tradesman, hell fall in concrete and die soon ...

Now theyve got a 200k DC pension (DB pension cashed in waiting to 'invest' it at 55) and a ~150k OO mortgage + 3 IO BTLs with about ~350k of debt. The last 2 are recent, last 10 months.

And just 45k of income, of which ~500/m is tied up on PCP deals.

They are at the stage where they needed to remortgage the OO to 'get a good deal'. The remortgage is only 2 years. The 2 year deal rate to SVR is huge - about 3-4%. They *had* to remortgage, otherwise they change  from 'making' 200/m cash on the first BTL, to needing to put in 200/m.

I reckon that theyve had the last extract money from the OO; all the equity has gone. When they next remortgage, whcih most be in about ~18 months times, computer will say No.

Thats assuming they make it - neither were aware of S24.

 

 

 

 

 

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58 minutes ago, spyguy said:

One of Mrs Spy friends, from kids play group.

We go there for the drinks (not my idea) about once a year - for kiddy catch up.

They always bring up 'the rental property' update on their tenants  - whove theyve been incredibly lucky with in not having a void.

Apparently we are 'cash rich'   Where as Mr + Mrs BTL: are 'asset rich'.

When they entered BTL they had a ~250k (probably less now) house / 50k  mortgage and 1 work DB pension. Mr BTL does not have a pension as hes a trades man magic get out - Oh, hes a tradesman, hell fall in concrete and die soon ...

Now theyve got a 200k DC pension (DB pension cashed in waiting to 'invest' it at 55) and a ~150k OO mortgage + 3 IO BTLs with about ~350k of debt. The last 2 are recent, last 10 months.

And just 45k of income, of which ~500/m is tied up on PCP deals.

They are at the stage where they needed to remortgage the OO to 'get a good deal'. The remortgage is only 2 years. The 2 year deal rate to SVR is huge - about 3-4%. They *had* to remortgage, otherwise they change  from 'making' 200/m cash on the first BTL, to needing to put in 200/m.

I reckon that theyve had the last extract money from the OO; all the equity has gone. When they next remortgage, whcih most be in about ~18 months times, computer will say No.

Thats assuming they make it - neither were aware of S24.

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1 minute ago, 24gray24 said:

What's stopping them selling all the btl at par? 

Voids.

Its hardly a buoyant market, so theyd need to cover about 800 + 700 + 700 in mortgage alone til the places sold.

And bear in mind msot of the buyers in ther last 5-10 have been BTlers.

6-12 months to sell and you are talking 25K in cash. And thats assuming they get their money back.

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  • 293 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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