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Is Buy To Let The Only Profitable Business Left?

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Buy-to-let mortgages hit record despite rate risesJames Rossiter, Property Correspondent

Buy-to-let mortgages accounted for a record 12 per cent of new loans in the first half of this year, new figures showed yesterday.

A report from the Council of Mortgage Lenders found that buy-to-let loans now represent 10 per cent of all mortgage balances, up from 3 per cent five years ago.

That increase comes despite a series of interest rate rises.

Homeowners and investors have endured five quarter-point rises in interest rates since last August, taking the Bank of England’s base rate to 5.75 per cent, but most economists expect that to rise to 6 per cent this year.

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Shortage alters buy-to-let logic

However, only 0.63 per cent of buy-to-let loans were three months or more in arrears in the first half, compared with 1.06 per cent of all loans in arrears, CML figures revealed.

The figures came as it emerged that first-time buyers are spending a record multiple of their salaries to put a foot on the bottom rung of the housing ladder.

First-time buyers borrowed a record multiple of 3.37 times earnings in June, up from 3.22 times the year before.

Fionnuala Earley, the chief economist at Nationwide, the country’s largest building society, said: “It may be too early to say whether we are creating a two-tier society of homeowners and renters but it is clearly becoming difficult for those on lower incomes or those without access to deposits – from their parents’ housing wealth or their own savings – to get on the ladder.”

The figures from the CML also reveal that loans to first-time buyers in June, usually one of the busiest times for the housing market, declined to 35,600 compared with 39,800 first-time buyer loans taken out a year ago.

Yolande Barnes, the head of residential research at Savills, the property agents, said: “The loan-to-income multiple is a big rise and worrying in the light of rising interest rate rises. The chance to get on the housing ladder is limited to a few. Lower income purchasers are being cut out of the market. You can multiply up [your borrowing] more as you go up the income scale.”

The plight of lower income earners in London will worsen where house prices continue to rise. Most first-time buyers are also being hit by higher stamp duty because the average price of starter homes in the capital exceeds the £250,000 threshold at which the tax doubles to 2 per cent.

Simon Rubinsohn, the chief economist at the Royal Institution of Chartered Surveyors, said: “The additional layer of demand from buy-to-let investors has had some affect on the first-time buyer market but some people are making lifestyle choices with a thriving rental sector giving more flexibility on where to live.”

Nigel Terrington, the chief executive of Paragon, the country’s largest specialist buy-to-let lender, said: “There is a shortage of housing in the UK and recent waves of immigration compound that problem. If you want the Government to do something other than relying on interest rates to control house price inflation, they simply have to build more homes.”

Can't argue with the logic there.

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The plight of lower income earners in London will worsen where house prices continue to rise. Most first-time buyers are also being hit by higher stamp duty because the average price of starter homes in the capital exceeds the £250,000 threshold at which the tax doubles to 2 per cent.

Can't they even check the basics it's 3% actually , not that i'm being awkward or anything like ..................

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Now that we're supposed to be environmentally friendly, wouldn't it be more logical to simply stop the "waves of immigration"? :rolleyes:

Nobody wants to, and even if "they" did (racists?) it is not possible to stop it. Its not legal to stop them, its their human right to come to Britain

If they dont like it here after a while they may go somewhere else.

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Nobody wants to, and even if "they" did (racists?) it is not possible to stop it. Its not legal to stop them, its their human right to come to Britain

If they dont like it here after a while they may go somewhere else.

Is it my human right to move to America then, or don't I need a green card or something? Often thought about, as I earn money online and could in theory work anywhere.

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As many people have said, BTL is the UK's 'sub prime'. It may appear to be profitable at the moment but the fall out will hit hard as the BTL market collapses.

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only 0.63 per cent of buy-to-let loans were three months or more in arrears in the first half, compared with 1.06 per cent of all loans in arrears

Yes, but BTLers each have 5-100 of them!

Probably juggling which they pay at the moment

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Buy-to-let mortgages hit record despite rate risesJames Rossiter, Property Correspondent

Buy-to-let mortgages accounted for a record 12 per cent of new loans in the first half of this year, new figures showed yesterday.

A report from the Council of Mortgage Lenders found that buy-to-let loans now represent 10 per cent of all mortgage balances, up from 3 per cent five years ago.

That increase comes despite a series of interest rate rises.

Homeowners and investors have endured five quarter-point rises in interest rates since last August, taking the Bank of England’s base rate to 5.75 per cent, but most economists expect that to rise to 6 per cent this year.

Related Links

Shortage alters buy-to-let logic

However, only 0.63 per cent of buy-to-let loans were three months or more in arrears in the first half, compared with 1.06 per cent of all loans in arrears, CML figures revealed.

The figures came as it emerged that first-time buyers are spending a record multiple of their salaries to put a foot on the bottom rung of the housing ladder.

First-time buyers borrowed a record multiple of 3.37 times earnings in June, up from 3.22 times the year before.

Fionnuala Earley, the chief economist at Nationwide, the country’s largest building society, said: “It may be too early to say whether we are creating a two-tier society of homeowners and renters but it is clearly becoming difficult for those on lower incomes or those without access to deposits – from their parents’ housing wealth or their own savings – to get on the ladder.”

The figures from the CML also reveal that loans to first-time buyers in June, usually one of the busiest times for the housing market, declined to 35,600 compared with 39,800 first-time buyer loans taken out a year ago.

Yolande Barnes, the head of residential research at Savills, the property agents, said: “The loan-to-income multiple is a big rise and worrying in the light of rising interest rate rises. The chance to get on the housing ladder is limited to a few. Lower income purchasers are being cut out of the market. You can multiply up [your borrowing] more as you go up the income scale.”

The plight of lower income earners in London will worsen where house prices continue to rise. Most first-time buyers are also being hit by higher stamp duty because the average price of starter homes in the capital exceeds the £250,000 threshold at which the tax doubles to 2 per cent.

Simon Rubinsohn, the chief economist at the Royal Institution of Chartered Surveyors, said: “The additional layer of demand from buy-to-let investors has had some affect on the first-time buyer market but some people are making lifestyle choices with a thriving rental sector giving more flexibility on where to live.”

Nigel Terrington, the chief executive of Paragon, the country’s largest specialist buy-to-let lender, said: “There is a shortage of housing in the UK and recent waves of immigration compound that problem. If you want the Government to do something other than relying on interest rates to control house price inflation, they simply have to build more homes.”

Can't argue with the logic there.

80:20 rule 80% will fail 20% will succeed like any business. Remember 80% went into BTL leaving their brain at home looking for capital appreciation without considering yields, unpaid rent with dodgy tenants, vacancy period, maintaince as well as subsiding the tenant. Like any Business a few will survive.

“There is a shortage of housing in the UK and recent waves of immigration compound that problem. If you want the Government to do something other than relying on interest rates to control house price inflation, they simply have to build more homes.”

Was chatting to one of these immigrants from Eastern Europe selling the Big Issue, unable to get a job, about 20 living in a 2 bedroom house. It is not the shortage its the afforability. These immigrants can't even afford the rent at the moment.

If we were Australia or New Zealand with the influx of cashed up wealthy skilled Europeans with healthy bank balances not competeing with the lower waged then I would be concerned. These wealthy immigrants( our emigrants) buy houses when they arrive on those shores. Our immigrants have very little money and are willing to do the low end jobs and are not thinking or buying a place, they are lucky if they can afford to rent a place, a large proportion end up at the local caravan site or camp site. If we had a property crisis then we would be seeing very few houses for sale and virtually nothing To Let in the EA windows. :lol::lol::lol::lol:

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Yes, but BTLers each have 5-100 of them!

Probably juggling which they pay at the moment

People need to consider just how many times buy to let players 'flex' their agreements, if they didn't they wouldn't come up with the deposits for the next one, and the next one etc. That's why the arrears figure is so low. BTL is not a profitable business now, it may have been pre 2003. Only a 25% correction is needed to wipe out the equity of most BTL property since then.

The reason BTL has proved popular and mass appealing as a business is two fold; A. ready available credit lines, a low overhead/low risk business model. B. anyone can do it, no business plans, no experience, no ability required.

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As many people have said, BTL is the UK's 'sub prime'. It may appear to be profitable at the moment but the fall out will hit hard as the BTL market collapses.

it is "buy to speculet" not "buy to let". You're dead right, even in America the blame on failing sub prime is attached to the "poor given housing they can't afford" ignoring the speculators and the bubble they have created.

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Profitable ?

Not if you have recently taken a mortgage for a BTL. Many will yield less than a hassle free savings account (5-6% and going up).

But as the BBC/ITV/C4 keep plugging BTL as a cure for the nations ills and a get-rich-quick-scheme, then there will always be muppets tempted to enter the market. Even when the market is turning down or busted. Typical bubble scenario, imo.

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Is it my human right to move to America then, or don't I need a green card or something? Often thought about, as I earn money online and could in theory work anywhere.

Apparantly not, the American believe it their human right to allow in only who they want to, and you can't argue with that as their cultural values are much different to the British.

The "British" (or at least their elected government) have a different understanding of human rights. They have just managed to persaud the US to release terrorists who although are not British citizans are entitled to live in Britain so can return home. Bless those kindly British people who give up their homes and more for the less fortunate of this world even when those people hate and despise them.

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Apparantly not, the American believe it their human right to allow in only who they want to, and you can't argue with that as their cultural values are much different to the British.

Mmmm. That's why the US has given amnesty to illegal immigrants roughly every 10 years since the end of WW2?

How many Latinos do you think arrive at US airports with the correct papers and a job in hand ? :rolleyes:

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