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Buy-to-let: The Price Ain't Right. Questionable Practices

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On a morning where we have seen a tirade of ramping by the RICs and VIs, here is what is really going on--overvaluation! No wonder asking prices are going up.



By Lorna Bourke

LONDON (Citywire) - Buy-to-let valuations on new properties face increasing scrutiny and investors could soon find it more difficult to arrange a loan. However, a well informed adviser can make all the difference.
Last December Matthew Wyles, director of Mortgage Works, pulled out of buy-to-let lending on new property developments, with the immortal words: "Owing to the current oversupply of newly built property, valuation in this sector is more of an art than a science."
Wyles was dropping a heavy hint that questionable practices were being used to inflate the true value of this type of property.
The Council of Mortgage Lenders (CML) and the Royal Institution of Chartered Surveyors (RICS) are still locked in debate about how to solve what has been described as a valuation problem rather than a buy-to-let issue, but no one wants to admit that anyone is at fault
"The reality of the situation is that lenders have to lend and some cannot afford to pull out of this market," says a broker who does not wish to be identified. "
While the market was rising, the lenders were not concerned."

Clearly, there has been a lot of over-valuation going on the ramp the market. Seems that there may be some squabbling going on among the conspirators. Oh what a complex web we weave when we tell porkies!

Edited by Realistbear

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Lenders should INSIST on borrowers signing a document which confirms that they have revealed all

incentives, cashbacks, and discounts.

If they then fail to do so, they have committed fraud, and if discovered the loan can be called.

Perhaps the document should also be signed by the vendor

Interesting point. Following the Wolf reforms in the legal profession court pleadings have to be signed off as to their truthfulness. Liability follows lies. Same standard should be applied to the housing racket. That would be a nice item for the Tories to make as part of their reforminst platform.

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Perhaps the most strongest indicator yet of a faltering house market? Deception to obtain more money and to skew the statistics. The tragedy is that a lot of people are believing the propaganda that the market is "recovering" (the VIs never said it has been going down so its makes you wonder why they are spouting a recovery) whereas the opposite is true.

HPC 2006.

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I noted the lower regulation standards for BTL mortgages in the original article. I think things may get worse before they get better:

This lack of regulation

Some companies like Woolwich actively chasing market share, latter having been quiet since 2003. What a time to re-enter the market agressively!

New entrants like foreign backed lenders & the mortgage bundling scheme currently being touted

However, I think we are at the stupid end of the market, with stupid lenders and stupid buyers: house prices too high and risk priced too low. (I noted from an earlier FT article that whilst Bank of England base rates have risen 1%+ from their low, mortgage interest rates have not risen as much: lenders are competing for diminishing returns and clawing some money back with one-off charges which don't make the price comparison tables.)

Reading round the subject of market crashes, fraud & leverage seem rather common.

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  • 302 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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