London homeowners face £7,300 mortgage rate shock

[nero120]

1 minute ago, Unmoderated said:

Just so I understand; you're predicting a massive reduction in supply of property for rent and, simultaneously a fall in the price point? 

So as to continue your thinking, if prices fall so that those renting can now afford to buy, what does that do to rental demand?

[nero120]

27 minutes ago, captainb said:

Given replacement of the BTL bro is an private equity backed bro, rather than dorris with no mortgage wouldn't bet on it 

Check out the prices on them.

https://uncle.co.uk/elephant-castle/?utm_term=elephant and castle flat&utm_campaign=E%26C+Generic+(London)+-+LMM&utm_source=adwords&utm_medium=ppc&hsa_acc=1900907798&hsa_cam=10093475665&hsa_grp=141799186770&hsa_ad=649847224245&hsa_src=g&hsa_tgt=aud-955415516853:kwd-341785555619&hsa_kw=elephant and castle flat&hsa_mt=p&hsa_net=adwords&hsa_ver=3&gad=1&gclid=CjwKCAjwhJukBhBPEiwAniIcNesVlnEWkGI_xFtu5XqK2M07nQSPBur9lt-a4ox8D8RQewDr4p5ybhoCwx4QAvD_BwE

HAHAHAHAHA!!!

You seriously think private equity is going to keep london property prices inflated when they can now get decent yields in MMFs for zero risk (which will increase as interest rates continue to increase)?! Why TF would any investor choose to tie up their capital in a depreciating asset whose price is dropping like a stone?!

What curious ideas some people have!

[captainb]

3 minutes ago, nero120 said:

HAHAHAHAHA!!!

You seriously think private equity is going to keep london property prices inflated when they can now get decent yields in MMFs for zero risk (which will increase as interest rates continue to increase)?! Why TF would any investor choose to tie up their capital in a depreciating asset whose price is dropping like a stone?!

What curious ideas some people have!

Nope but they will push to keep rents high to cover those debts. 

Which was your original bizarre point... That somehow massive reduction in supply will reduce rents (in the absence of new builds)

[nero120]

2 minutes ago, captainb said:

Nope but they will push to keep rents high to cover those debts. 

Which was your original bizarre point... That somehow massive reduction in supply will reduce rents (in the absence of new builds)

BTLers are dumping, private equity WILL NOT be buyers, renters become OOs, rental demand falls as does supply, less BTL means rents do not need to aggressively increase to match interest rates, it's really not that hard.

[captainb]

4 minutes ago, nero120 said:

BTLers are dumping, private equity WILL NOT be buyers, renters become OOs, rental demand falls as does supply, less BTL means rents do not need to aggressively increase to match interest rates, it's really not that hard.

Cool. And in this scenario, there's no increase in rental demand from population growth right? Or people giving up on expensive mortgages and downsizing to rent? 

I'm going to make a bizarre prediction that new rental supply will continue to suck in increased % of rising wages as supply dwindles against worsening demand. Just like it has over the last couple of years......

 

Of course it could be solved by the state building an appropriate level of housing to satisfy demand at the lower end rather than HMO etc. Sadly they won't.

[nero120]

5 minutes ago, captainb said:

Cool. And in this scenario, there's no increase in rental demand from population growth right? Or people giving up on expensive mortgages and downsizing to rent? 

I'm going to make a bizarre prediction that new rental supply will continue to suck in increased % of rising wages as supply dwindles against worsening demand. Just like it has over the last couple of years......

 

Of course it could be solved by the state building an appropriate level of housing to satisfy demand at the lower end rather than HMO etc. Sadly they won't.

Sorry you think migrants arriving on boats are paying sky high BTL rents?! LOL!

As interest rates go up, zombies companies go bust, people lose their jobs, those wanna-be middle classers that were in London to "find their fortune" will either become OOs or GTFO of London.

Why can't people accept the fact that the era of cheap money is OVER.

Edited June 12, 2023 by nero120

[captainb]

5 minutes ago, nero120 said:

Sorry you think migrants arriving on boats are paying sky high BTL rents?! LOL!

As interest rates go up, zombies companies go bust, people lose their jobs, those wanna-be middle classers that were in London to "find their fortune" will either become OOs or GTFO of London.

Why can't people accept the fact that the era of cheap money is OVER.

No I don't think that but you seem to be under the illusion that most migrants arrive in small boats...

Good luck waiting for the rental collapse. 

[iamnumerate]

41 minutes ago, spyguy said:

 I thnk the bigger shock will be finding out  that London prices have been dropping for the last 7+ years.

 

 

I wish that they were true but I really don't think it is - well not every where in London anyway.

[winkie]

2 hours ago, Armus said:

Our superiors in Z3 will be ok though.

Not if they remortgaged to buy multiple BtoLs. 

There is no reason why a person over the age of 50 should still be an underwater debt slave......

 

[shlomo]

46 minutes ago, Unmoderated said:

Just so I understand; you're predicting a massive reduction in supply of property for rent and, simultaneously a fall in the price point? 

We have our own version of common sense on HPC

[nero120]

Just now, shlomo said:

We have our own version of common sense on HPC

Seems to be no shortage of half-wits with vested interest on here. Second order thinking just too much for them.

[Unmoderated]

1 hour ago, nero120 said:

So as to continue your thinking, if prices fall so that those renting can now afford to buy, what does that do to rental demand?

Big IF.

Poster predicts exit of all mortgaged BTL. So you expect all those renters to be able to suddenly purchase those houses that are now sold at a price they could afford?

Will they even have deposits? 

There will be a rent trap imho. Some will be able to buy, or move in with friends and family but many wont or can't. 

People are already exiting apparently but rents don't seem to be getting cheaper.

[Unmoderated]

25 minutes ago, nero120 said:

Seems to be no shortage of half-wits with vested interest on here. Second order thinking just too much for them.

It seems you interpret second order thinking to be you introducing a new out of scope point that tries to make it now seem like the false prediction will turn out to be true? 

In other words, shifting a goal post to score a goal. 

I'm interested if there's another point in history when, coinciding with a big fall in rental property supply rents fell in the private sector.

Market will hit equilibrium at some point - true. But it's a false one. 

If BTL are selling up in droves then who is buying them? Would they buy them with sitting tenants? Perhaps they'd sell them to HongKongers. Perhaps local authority buys them to house asylum claimants. 

Your version of a second step in this scenario is rather basic. 

[desiringonlychild]

52 minutes ago, nero120 said:

Sorry you think migrants arriving on boats are paying sky high BTL rents?! LOL!

As interest rates go up, zombies companies go bust, people lose their jobs, those wanna-be middle classers that were in London to "find their fortune" will either become OOs or GTFO of London.

Why can't people accept the fact that the era of cheap money is OVER.

They are paying high rents but sharing with others in order to pay it. Like the 18 people in a 2 bed ex council flat. Landlord was charging £500 per bunk per month and his rental yield was off the charts. 

 

Unlike locals they have no qualms living like that so if you don't wisht to live like that you need to pay a premium.

[lastlaugh]

1 hour ago, Unmoderated said:

Just so I understand; you're predicting a massive reduction in supply of property for rent and, simultaneously a fall in the price point? 

It’s a fair question, although a little disingenuous (The original post didn’t mention a massive reduction in supply, just the death of BTL, and not the same thing.  But I get your point)

To answer the question, the opposite phenomenon needs explaining.  Why have rents increased so much, when there has been a massive increase in supply since the 90’s?  Certainly the case in London where I’ve been in the rental market for 25 years.  I don’t think immigration is the answer, not at these prices.

My suspicion is that the price signal is not quite what it seems.

[Unmoderated]

15 minutes ago, lastlaugh said:

It’s a fair question, although a little disingenuous (The original post didn’t mention a massive reduction in supply, just the death of BTL, and not the same thing.  But I get your point)

To answer the question, the opposite phenomenon needs explaining.  Why have rents increased so much, when there has been a massive increase in supply since the 90’s?  Certainly the case in London where I’ve been in the rental market for 25 years.  I don’t think immigration is the answer, not at these prices.

My suspicion is that the price signal is not quite what it seems.

Good points. Death of BTL I took to mean BTL exiting the market and selling those places on. Taking the rental market in isolation then it's fair to state that there would be some reduction in demand alongside the reduced supply. 

But, how many renters are in a position to buy? As we already saw there's not a huge amount in it, salary wise, between paying a £400K mortgage and renting something at £2.5K/month. Also seems to be roughly the same monthly cost and that's a 25 year mortgage. Arguably it's still cheaper to buy at least on a monthly basis if you stretch your term to 35 years. 

The elephant in the room is deposits and that's a function of house prices. While the monthly payments might be serviceable how long would it take you, earning £80k and paying £2.5K a month in rent to save the necessary £50K to buy something? You'd have £2.1K after mortgage. Break it down further and another £150 to council tax, £150 (maybe less) on utilities? £100K on phone and internet. £100 on travel (no car but Oyster etc) That's £1,600. Then you're young, you want to meet people and do things, eat out, go for drinks etc. £600 for that would seem low but even then you're talking 4 years+to get that deposit together. 

Prices would have to flex down a long way without rentals climbing to enable people to up and out into ownership. 

[nero120]

Some odd mental gymnastics going on here to try and justify prices staying high. It's very simple people, if the next buyer if only willing/able to pay 50% of current asking prices then price will gap down by 50%. The market simply does not freeze out of wishful thinking because current asset owners don't want prices to fall, there is always a seller who will meet the next buyer.

What we are going through right now is unprecedented (lowest interest rates in recorded history to 5%+ mortgage rates within 18 months), and I can understand the reluctance to accept that the market has repriced itself by orders of magnitude lower. This will not be confirmed until probably a year from now when the LR stats for sales agreed this month will be released, and the trend is only going one way.

No one's coming to bail you out this time.

[70PC]

3 minutes ago, nero120 said:

Some odd mental gymnastics going on here to try and justify prices staying high. It's very simple people, if the next buyer if only willing/able to pay 50% of current asking prices then price will gap down by 50%. The market simply does not freeze out of wishful thinking because current asset owners don't want prices to fall, there is always a seller who will meet the next buyer.

What we are going through right now is unprecedented (lowest interest rates in recorded history to 5%+ mortgage rates within 18 months), and I can understand the reluctance to accept that the market has repriced itself by orders of magnitude lower. This will not be confirmed until probably a year from now when the LR stats for sales agreed this month will be released, and the trend is only going one way.

No one's coming to bail you out this time.

Mental gymnastics sums it up well. A modest price correction followed by renewed growth in 2 years time? Nah. This is not like shares. A house on a plot of land is what it is. It's value is what a buyer can or will pay. They can pay a lot more if mortgage rates are 2% than 4%.  

It is the way this done with a straight face. When you are on top of Everest, that's it. Its not like shares 

[nero120]

14 minutes ago, 70PC said:

Mental gymnastics sums it up well. A modest price correction followed by renewed growth in 2 years time? Nah. This is not like shares. A house on a plot of land is what it is. It's value is what a buyer can or will pay. They can pay a lot more if mortgage rates are 2% than 4%.  

It is the way this done with a straight face. When you are on top of Everest, that's it. Its not like shares 

You mean in the death zone? An apt metaphor indeed! 

[Locke]

22 hours ago, Unmoderated said:

the big win for mortgage holders is the erosion of the mortgage debt. 

If your income outpaces the rate at which your food and energy cost.

[Locke]

21 hours ago, nero120 said:

Sorry you think migrants arriving on boats are paying sky high BTL rents?! LOL!

The government does that for them.

Of course, that is like an alcoholic getting onto the meth in terms of impact on inflation and the economy generally.

[Unmoderated]

54 minutes ago, Locke said:

If your income outpaces the rate at which your food and energy cost.

That's barely a sentence..... I think you mean to say "If your income rates of increase outpace the rate of food and energy increases"?

It's more complicated than that but, actually, no.

Firstly, food and energy only account for a small % of most people's take home. I spend more on my mortgage than food and energy most months. 

If your net income maintains inflation over time (forget stochastic noise over a year or two) then, since the debt is fixed, it's falling not only in real terms but in real personal terms. 

All my costs are higher now than when I bought my house but the debt to income ratio has fallen from 4.5X joint to 3.6X single. Originally it would have been about 8X my salary if buying alone. 

I've had a good salary increase with promotions etc but I'm fairly sure that energy prices have kept up and probably food too.

The real kick in the teeth though would be if food and energy go up and then your mortgage payments go up by 40% when you come off your fixed rate. 

[Unmoderated]

19 hours ago, nero120 said:

Some odd mental gymnastics going on here to try and justify prices staying high. It's very simple people, if the next buyer if only willing/able to pay 50% of current asking prices then price will gap down by 50%. The market simply does not freeze out of wishful thinking because current asset owners don't want prices to fall, there is always a seller who will meet the next buyer.

What we are going through right now is unprecedented (lowest interest rates in recorded history to 5%+ mortgage rates within 18 months), and I can understand the reluctance to accept that the market has repriced itself by orders of magnitude lower. This will not be confirmed until probably a year from now when the LR stats for sales agreed this month will be released, and the trend is only going one way.

No one's coming to bail you out this time.

Ironic bit in bold. 

Are you suggesting that.... this time it's different?

I'm fine with your almost impossible scenario. I could probably trade up to a house that's worth £1m today all my myself if prices come down 50%. But, as I've pointed out you've got a big IF.

Turning it around. If the next buying is willing/able to 150% of the current asking price then prices will rise 50%.

That is unbelievably stupid to post as some kind of logic. 

If... then.... yeah. If then anything works doesn't it?

I'm still seeing loan multipliers at 4 to 4.5X income. Not as cheap as it was but people can afford it. 

Same rules as ever. Nice house in a nice town and there will always be more than one buyer. If you're buying, just buy well. 

Do not buy some modern nonsense on the outskirts of a place where amenities are only accessible by car. 

[Badhairday]

22 hours ago, shlomo said:

We have our own version of common sense on HPC

To be fair, that is exactly what happened post covid - the number of properties for rent fell as BTLers sold up, and rents skyrocketed. This was counter intuitive, but it turns out that people are willing to share (HMO) whilst they are scrimping and saving for their own place, but once they buy it is a different story. So a 5 bed house, which was used as an HMO for 5 adults would be used by a couple maybe once it has been sold on.

[lastlaugh]

44 minutes ago, Badhairday said:

To be fair, that is exactly what happened post covid - the number of properties for rent fell as BTLers sold up, and rents skyrocketed. This was counter intuitive, but it turns out that people are willing to share (HMO) whilst they are scrimping and saving for their own place, but once they buy it is a different story. So a 5 bed house, which was used as an HMO for 5 adults would be used by a couple maybe once it has been sold on.

Has there been a significant sell-up of BTL yet?  I’m not convinced.

I agree that rents have skyrocketed.  Certainly the sticker prices.  But I don’t find the explanations for that convincing either.  The sticker prices only tell a part of the story, and are a misleading price signal.  They are, by implication, outliers in the market.  Representing the point where the greediest landlords meet the most price-insensitive tenants.  A small fraction of the overall market.