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grim up north

Fixed Rate Complacency

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It seems some of the BTL brigade are quite unconcerned about IR going up as they have fixed rate mortgages.

However, as prices start to fall, they will have the nice conundrum of keeping the house and taking the hit on their equity or selling up and taking the hit from the massive penalties that the mortgage companies will joyfully pass on.

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I think that most will agree that a loss of equity on paper against a cashflow positive rental property will not matter in the slightest especially as most decent landlords will have structured the deal in such a way that the property is leveraged with none of their money actually in the property.

So why sell.

As for the redemption penalties. Those that are or want to sell have made so much in the rising market that a grand or two here or there is nothing.

So it's no where as bad as you wished it was :D

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I think that most will agree that a loss of equity on paper against a cashflow positive rental property will not matter in the slightest especially as most decent landlords will have structured the deal in such a way that the property is leveraged with none of their money actually in the property.

So why sell.

As for the redemption penalties. Those that are or want to sell have made so much in the rising market that a grand or two here or there is nothing.

So it's no where as bad as you wished it was :D

keep dreaming! B)

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I wasn't being as smug as you assume. I had BTL properties on variable rates and sold up a couple of years ago, paid my cap gains tax and put the money in the bank awaiting the crash.

Human nature is a funny thing. If prices start to fall, people will sell. Why hold on to something worth 100k which may be worth 80k in 2 years time? The £450/mth rental income? I don't think so. So many BTLers business plan is based on capital appreciation - I know mine was. Once it becomes capital depreciation, watch for the rush to the doors.

Being a landlord is a pain which used to be worth it because of the 10% return. When the return fell it was replaced by the capital appreciation. Now that is going to go too. Being a landlord will be a profitless pain. Lets see what happens..........

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massive penalties that the mortgage companies will joyfully pass on.

penalties which, I would add, are growing by the day. The lenders are starting to make it harder for people to switch - marking out their terroritory and holding their loans now. Liquidity drying up in this sense too, it seems.

When firms stop concentrating on new business and switch their focus to their existing business, it tends to be during a downturn.

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As for the redemption penalties. Those that are or want to sell have made so much in the rising market that a grand or two here or there is nothing.

Fine if you bought a few years ago, but what about all the muppets that have been sucked into the BTL craze in the last year?

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......most decent landlords will have structured the deal in such a way that the property is leveraged with none of their money actually in the property.

Quite the most ridiculous comment I've ever read on HPC. Are you suggesting that it is possible to somehow structure a BTL so that you can make gains if prices rise but somebody else makes losses if the prices fall?

Being leveraged assets the opposite applies. If you have 10% equity in a property and the property value falls 10% you have lost 100% of your wealth.

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A lot of renters are going to get turfed out as the landlords bail out or are repossessed.

My big fear for the HPC. That said, I think there still should be a sufficient supply with landlords forced to rent because they can't find buyers.

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A lot of renters are going to get turfed out as the landlords bail out or are repossessed.

which is why i rent from a professional landlord...phew!

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keep dreaming! B)

Spot on.

I have friend who is a full time Mum (ie no job) who bought two years ago on an IO mortgage.

Rented the property out straight away so that "someone else can pay my mortgage". However, she made no money on the monthly rent, but didn't seem to mind because "the property will go up £50k in two years".

Two years on, the property has not gone up by £50k, and last weekend she said to me "have had enough of this property. It's not making me enough money, in rent or equity. I'd like something that would give me a monthly income".

I think that there are alot of amateur BTLers out there that have watched too many Beeny programmes and read the Daily Mail, who think that this is a very easy way to make alot of money very quickly. Obviously, it's not.

With her, and lots of others like her, interest rates didn't even come into the equation.

Ouch

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I'd like something that would give me a monthly income

I believe it's called 'a job'...

Of course this is now where she discovers that she can't sell it for as much as she paid for it, so she's stuck with the thing even though she's losing money every month.

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A lot of renters are going to get turfed out as the landlords bail out or are repossessed.

It's so amusing to read the comments from all the armchair economists on here. If you guys are so clued up as to what the future holds for the property market, why aren't you working for Goldmans or BarCap ? That way you'd be one of the people able to afford in this over-priced market and wouldn't be on here wringing your hands at the prospect of all these landlords going belly up.

The fact remains that there is a solid core of landlords who are ever-so-good at this sort of thing. They're the kind that make money whether markets rise or fall and have fixed rates, contingents or out-and-out sh*tloads of equity in their portfolios. These guys ain't goin' down just yet and certainly not from a puny .25% increase in base rates.

Sure there'll be a few who will go to the wall cos their £25K a year job ain't gonna make up the shortfall between the rent they get in and the mortgage payments they have to make on their variable rate BTL mortgage with Woolwich Direct or whatever but it'll take a little more than a quarter point rise to do it. Sure, speculate but try not to love the sounds of your own voices so much.

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I think that most will agree that a loss of equity on paper against a cashflow positive rental property will not matter in the slightest especially as most decent landlords will have structured the deal in such a way that the property is leveraged with none of their money actually in the property.

ok brightspark,so whose money is it????...the banks??????

trick question actually...because it IS!!!!!!

...and I don't think for one minute ANY landlord worth their salt will be happy with negative cashflow.The smart ones have got a sense of risk vs reward.

the present situation is high risk/low reward....complete folly indulging in this kind of market,ask the majority of dot-commers.

...who incidentally had bugger all sense of risk as well,except this is on a MUCH larger scale and more vociferously hyped by the media.

SUCKERS!! :lol::lol::lol:

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It's so amusing to read the comments from all the armchair economists on here. If you guys are so clued up as to what the future holds for the property market, why aren't you working for Goldmans or BarCap ? That way you'd be one of the people able to afford in this over-priced market and wouldn't be on here wringing your hands at the prospect of all these landlords going belly up.

The fact remains that there is a solid core of landlords who are ever-so-good at this sort of thing. They're the kind that make money whether markets rise or fall and have fixed rates, contingents or out-and-out sh*tloads of equity in their portfolios. These guys ain't goin' down just yet and certainly not from a puny .25% increase in base rates.

Sure there'll be a few who will go to the wall cos their £25K a year job ain't gonna make up the shortfall between the rent they get in and the mortgage payments they have to make on their variable rate BTL mortgage with Woolwich Direct or whatever but it'll take a little more than a quarter point rise to do it. Sure, speculate but try not to love the sounds of your own voices so much.

Not an armchair economist here........basic O level maths........an i could see that so many muppets, nee lemmings stripping areas of property like a swarm of locust, building their little 0-folio up of btl,s.

Easy money my ****.......Domino Rally Action Alley 3..2...1...go........

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It seems some of the BTL brigade are quite unconcerned about IR going up as they have fixed rate mortgages.

However, as prices start to fall, they will have the nice conundrum of keeping the house and taking the hit on their equity or selling up and taking the hit from the massive penalties that the mortgage companies will joyfully pass on.

but the person buying has to pay the current IR's and the majority of property out there didn't cost anything approaching current market value..

some very exposed investors are about to learn all about having to hold onto their asset

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It's so amusing to read the comments from all the armchair economists on here. If you guys are so clued up as to what the future holds for the property market, why aren't you working for Goldmans or BarCap ? That way you'd be one of the people able to afford in this over-priced market and wouldn't be on here wringing your hands at the prospect of all these landlords going belly up.

The fact remains that there is a solid core of landlords who are ever-so-good at this sort of thing. They're the kind that make money whether markets rise or fall and have fixed rates, contingents or out-and-out sh*tloads of equity in their portfolios. These guys ain't goin' down just yet and certainly not from a puny .25% increase in base rates.

Sure there'll be a few who will go to the wall cos their £25K a year job ain't gonna make up the shortfall between the rent they get in and the mortgage payments they have to make on their variable rate BTL mortgage with Woolwich Direct or whatever but it'll take a little more than a quarter point rise to do it. Sure, speculate but try not to love the sounds of your own voices so much.

I don't think anyone's suggesting that ALL landlords are going to go under. There have always been, and always will be, landlords making a living from property. I rent from a local property development company who have rentals to keep some diversity in their business. They don't need to follow IRs up, or sell my house. They charge a very fair rent and are happy to have a good tenant. It's the marginal, amateur landlords that caused the bubble that are going to get wiped out. I don't relish human suffering but they have ALL got into it to profit from capital gains i.e. to sell eventually to another BTL and not care if their "business" succeeds or fails, or sell to an overstretched OO and not care if they live in poverty as a result of their mortgage debts. They wanted to feed off the bubble and now the bubble is going to feed off them. I have no sympathy.

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keep dreaming! B)

I know it may hurt but................................................ :D

Quite the most ridiculous comment I've ever read on HPC. Are you suggesting that it is possible to somehow structure a BTL so that you can make gains if prices rise but somebody else makes losses if the prices fall?

Being leveraged assets the opposite applies. If you have 10% equity in a property and the property value falls 10% you have lost 100% of your wealth.

If you have bought right and fixed your deal at an attractive rate (forget the "published" rates) and concentrate on positive cashflow on the properties that you retain (after selling the bosters at a profit) then where is the risk? No more than any other investment.

The big plus is that most astute landlords remortgaged so that they have NO personal cash in the deal.

Keep em let and keep the cashflow.

The capital gains props were sold long ago :D:D:D

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The next year or two should be interesting as these 'fixed term' mortgages come to an end

Good point you have raised here.

Yes !! I dont have a PHd in economics but going from 2.5% to 5% on a huge BTL mortgage will be a shock. This will encourage BTLs to sell their dwindling assets. They will have no chance in increasing the rent as by then there will be a glut of homes on the market. This is going to be more catastrophic than the 90s when BTLs were only about 2% of the market.

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If anyone is seriously considering BTL as an alternative they would do well to read the following:

http://news.bbc.co.uk/1/hi/business/5179928.stm

For the record I have found that flats do not have a constant stream of tenants so there is always the risk of having to meet two or more mortgages and if interest rates start rising while rents are static this could become a serious problem.

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The longer you hold an asset, the lower the risk. If I was a BTL investor and had my mortgage spread over 20 years and has bought, say for my pension, in the last 5 years, then would I worry about a 0.25% increase in Interest rates right now? probably not.

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The big plus is that most astute landlords remortgaged so that they have NO personal cash in the deal.

Eh, how did you figure that one out? :rolleyes:

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  • 339 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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