B T L Arrears Rose By A Massive 54% Yo Y

[Realistbear]

http://www.independent.co.uk/money/mortgag...ain-787604.html

Buy-to-let landlords feel the strain

By James Daley

Tuesday, 26 February 2008

The number of landlords in serious arrears on their mortgage leapt by more than 25 per cent in the final quarter of 2007, as the combined effect of a string of interest rate rises and a tightening in the credit markets began to take their toll on the buy-to-let sector.

According to new figures from the Council of Mortgage Lenders (CML), the number of landlords in arrears on their mortgage by more than three months rose to almost 7,600 during the final three months of last year, up from about 6,050 in the previous quarter.

Year on year, the number of landlords in arrears was up more than 54 per cent

.

..../

However, Michael Saunders of Citi European Economics sounded a note of caution over the figures.

“It is unlikely that the full impact of the credit crunch is apparent in these data, given that the sharp tightening in mortgage lending standards only really occurred in the last couple of months of 2007,”

he said.

“It must be remembered that housing slowdowns usually unfold gradually over quarters and years, and we will probably have to wait for data on [buy-to-let data in the first half of 2008] to see a clearer impact of the credit crunch. But there is a clear hint of worsening credit quality.

The share of BTL mortgages in arrears is at a record high

.

I think it is safe to say that BTL is over as anything other than a way to commit financial suicide.

Edited March 2, 2008 by Realistbear

[stuckmojo]

54%!!!!!

crash picks up speed

[Havoc]

Frightening!!!

The worm has really turned.

[Paddles]

There's a contradiction going on here at the CML.

Last week they issued this press release; http://www.cml.org.uk/cml/media/press/1514

Which included the following paragraph relating to BTL;

Arrears remain lower than in the wider mortgage market, with 0.73% of buy-to-let loans in arrears of more than three months at the end of 2007 (up from 0.63% at the end of the first half of the year, and 0.58% at the end of 2006). This compares with 1.1% in the wider mortgage market. The proportion of buy-to-let mortgages taken into possession was also smaller than in the wider market - 0.18% for the year as a whole, up from 0.13% in 2006 but lower than the 0.23% in the wider market in 2007.

[Realistbear]

There's a contradiction going on here at the CML.

Last week they issued this press release; http://www.cml.org.uk/cml/media/press/1514

Which included the following paragraph relating to BTL;

Gotcha!

[DisplayNameChanged]

I don't want to be the party poop but:

7600 landlords out of 1,000,000 BTL mortgages - if only 1 BTL mortgage per landlord that is 0.76%.

Didn't we see this figure last week?

The % of normal mortgages 3 months behind was something like 1.2% so BTLers still behaving better.

Going in the right direction but a long way to go before it makes a huge difference IMHO.

[Realistbear]

I don't want to be the party poop but:

7600 landlords out of 1,000,000 BTL mortgages - if only 1 BTL mortgage per landlord that is 0.76%.

Didn't we see this figure last week?

The % of normal mortgages 3 months behind was something like 1.2% so BTLers still behaving better.

Going in the right direction but a long way to go before it makes a huge difference IMHO.

As the article says, the data is pre-credit crunch. The YoY is based on a low, pre-credit crunch base. I think they are pointing to an accelerated trend in BTL arrears.

[Paddles]

I don't want to be the party poop but:

7600 landlords out of 1,000,000 BTL mortgages - if only 1 BTL mortgage per landlord that is 0.76%.

Didn't we see this figure last week?

The % of normal mortgages 3 months behind was something like 1.2% so BTLers still behaving better.

Going in the right direction but a long way to go before it makes a huge difference IMHO.

Yep, good point. I've not had my second expresso yet, still lazy thinking.

Interesting negative spin from the Indie on figures that the CML spun as positive though.

[redgenieuk]

I don't want to be the party poop but:

7600 landlords out of 1,000,000 BTL mortgages - if only 1 BTL mortgage per landlord that is 0.76%.

Didn't we see this figure last week?

The % of normal mortgages 3 months behind was something like 1.2% so BTLers still behaving better.

Going in the right direction but a long way to go before it makes a huge difference IMHO.

This is such a low number, and great that it is climbing, but it is not climbing anywhere near fast enough to make a difference. I think the number of BTL repo's needs to be greater than the number of new BTL's, that's a key point. Where in time will they meet? I am not sure, I would guess that the slowdown in BTL will probably make up most of the gap as repo's are just not going to be running at high enough levels IMHO.

BTL'er will probably get hit tail end of the crash I think. I know a lot of people who have bought BTL's and must be loosing money on them one way or the other. They can afford to however, painful as it is.

We need the blocks of flats that people have bought to come back on, this will be the key IMHO, 40 in a block all being sold off at once. Carnage!

[Bardon]

We need the blocks of flats that people have bought to come back on, this will be the key IMHO, 40 in a block all being sold off at once. Carnage!

Who would be the likely buyer in this scenario ?

[BandWagon]

I think it is safe to say that BTL is over as anything other than a way to commit financial suicide.

I prefer to regard it as charity, they're kind, benevolent types these BTL landlords.

Why else would they be so keen to subsidise the lives of complete strangers, at enormous financial risk to themselves?

[shippers]

This is such a low number, and great that it is climbing, but it is not climbing anywhere near fast enough to make a difference. I think the number of BTL repo's needs to be greater than the number of new BTL's, that's a key point. Where in time will they meet? I am not sure, I would guess that the slowdown in BTL will probably make up most of the gap as repo's are just not going to be running at high enough levels IMHO.

BTL'er will probably get hit tail end of the crash I think. I know a lot of people who have bought BTL's and must be loosing money on them one way or the other. They can afford to however, painful as it is.

We need the blocks of flats that people have bought to come back on, this will be the key IMHO, 40 in a block all being sold off at once. Carnage!

You mean like these in Liverpool?

http://www.rightmove.co.uk/viewdetails-195...=1&tr_t=buy

http://www.rightmove.co.uk/viewdetails-189...=1&tr_t=buy

http://www.rightmove.co.uk/viewdetails-100...=2&tr_t=buy

http://www.rightmove.co.uk/viewdetails-158...=3&tr_t=buy

http://www.rightmove.co.uk/viewdetails-197...=4&tr_t=buy

[cartimandua51]

Who would be the likely buyer in this scenario ?

Housing Associations. Slums of the future. Unsuitable for families, so will likely to be let to key workers (if lucky) or half-way house type accommodation for recovering druggies if not.

[hostman]

Who would be the likely buyer in this scenario ?

No one, until the price drops significantly and you may see first time buyers snapping them up.

[beans on toast]

TIIIIIMMMMMMBBBEEEERRRRRRR!!!!!!!!!!

[okaycuckoo]

The thing about BTL defaults is that problems with servicing one mortgage impact the servicing of the LL's other mortgages. I've seen a few "little empires" collapse.

I came across one nasty piece of work in December - a guy with 40 properties who went in to default on one mortgage, but kept the local authority rent payments and the tenant's deposit. The court granted a possession order. Early this week an order was granted against a second of his properties. The lender told me over the phone that the LL was a "serial offender".

There is undoubtedly a domino effect, which should cause exponential increases in BTL defaults. But how fast it escalates is anyone's guess.

[redgenieuk]

Who would be the likely buyer in this scenario ?

Future bankrupts! ???

Well if noone buys them that is even better. If noone want them the price will drop further.

The lower the better!

[redgenieuk]

The thing about BTL defaults is that problems with servicing one mortgage impact the servicing of the LL's other mortgages. I've seen a few "little empires" collapse.

I came across one nasty piece of work in December - a guy with 40 properties who went in to default on one mortgage, but kept the local authority rent payments and the tenant's deposit. The court granted a possession order. Early this week an order was granted against a second of his properties. The lender told me over the phone that the LL was a "serial offender".

There is undoubtedly a domino effect, which should cause exponential increases in BTL defaults. But how fast it escalates is anyone's guess.

If they were all on one mortgage are they not allowed to apply for possession of all them at once?

[redgenieuk]

You mean like these in Liverpool?

http://www.rightmove.co.uk/viewdetails-195...=1&tr_t=buy

http://www.rightmove.co.uk/viewdetails-189...=1&tr_t=buy

http://www.rightmove.co.uk/viewdetails-100...=2&tr_t=buy

http://www.rightmove.co.uk/viewdetails-158...=3&tr_t=buy

http://www.rightmove.co.uk/viewdetails-197...=4&tr_t=buy

Yes, like those.

Trouble is noone in their right mind wants a return on 5%. What yield would you want at this time with the market in this posistion.

They will be waiting a very long time at those prices. I think probably they would get more kicking out the tennants and selling them private. Probably cannot afford to though.

Those links are sever people who won't be millionaires anytime soon. Esp after paying off the mortgage.

[redgenieuk]

I prefer to regard it as charity, they're kind, benevolent types these BTL landlords.

Why else would they be so keen to subsidise the lives of complete strangers, at enormous financial risk to themselves?

Stupidity, no other reason at all!

[the end is a bit nigher]

Housing Associations. Slums of the future. Unsuitable for families, so will likely to be let to key workers (if lucky) or half-way house type accommodation for recovering druggies if not.

Housing associations are buying many of the flats in Leeds city centre

[kagiso]

Who would be the likely buyer in this scenario ?

The only likely buyers will be professional landlords; the ones that left the market 4-5 years ago.

They will pay priced on the basis of proper rental yield, of 8% or so, to include a good old fashioned risk premium. They will also factor in a likely fall in rents because of the glut of rental properties currently coming on the market. (When looking for my existing rented house, I had a very good chat with a couple of professional landlords who said pretty much this - they are waiting to rip the amateurs to pieces - both a bit pissed off at having to put their expansion plans on hold for half a decade).

These professionals will put the properties back on the rental market at competitive rents to ensure no voids.

This will then reduce the rental level for another swathe of struggling BTLers; pushing them into bankruptcy.

Etc.

This is why it is going to be a bloodbath, and a very rapid crash.

At the moment rents in London and the south-east are being held up by people (like us) who have sold but moved into rented accommodation rather than buying.

But as the spring progresses, and the people who can't sell put their properties back on the rental market, then rents will start sliding.

The graphs on daftwatch show how this panned out in Ireland a year ago. For a while properties available for rent dropped (presumably supporting rent levels), then moved back up as people couldn't sell.

http://daftwatch.atspace.com/

The whole collapse will only stabilise when rents have stopped falling and house prices are priced low enough to give decent yields on these reduced rents.

[Bardon]

The whole collapse will only stabilise when rents have stopped falling and house prices are priced low enough to give decent yields on these reduced rents.

and ftb think it is better to buy than rent, then the cycle starts over again

not convinced that rents will drop as much as you expect though

[dances with sheeple]

I don't want to be the party poop but:

7600 landlords out of 1,000,000 BTL mortgages - if only 1 BTL mortgage per landlord that is 0.76%.

Didn't we see this figure last week?

The % of normal mortgages 3 months behind was something like 1.2% so BTLers still behaving better.

Going in the right direction but a long way to go before it makes a huge difference IMHO.

Would the small number so far not just be the ones with multiple mortgages who thought they were "professional" landlords and are now coming unstuck? There must be a massive number of people, who like my landlord, bought a flat as their "pension" and although they have always been able to rent it out are starting to sour on the long term idea as prices are seen to be dropping. My landlord works, his wife works, for all I know they may have paid off their main mortgage, the money I pay him probably covers all or most of his mortgage on the flat. He seems to have bought an extra flat in the same way you would gravitate towards a high paying interest account without understanding how the bank could go bust (to be fair bank busts were not on many peoples horizon until recently, but now we seem to have a potential banking and housing bust) As the market has deteriorated he has gone from telling me 18 months ago that it was his pension, to saying that when I leave he will put in a new kitchen and bathroom and sell it, but he has not hinted that I need to leave too soon. Isn`t it just all the one extra flat people just realising that their pension idea isn`t sound any more that will finish BTL. They won`t go bust, they will just flog the flat at some point (I know, IF they can get a buyer) and they and millions others will just go off the idea of buy to let, maybe getting sucked into the next trend whatever that may be. Sorry to ramble, but my point is that we don`t need catastrophic headlines about mortgage arrears, just a lot of people seeing the pointlesness of just breaking evenish on an investment that is not as exciting as they first thought?

[munro]

I don't want to be the party poop but:

7600 landlords out of 1,000,000 BTL mortgages - if only 1 BTL mortgage per landlord that is 0.76%.

Didn't we see this figure last week?

The % of normal mortgages 3 months behind was something like 1.2% so BTLers still behaving better.

Going in the right direction but a long way to go before it makes a huge difference IMHO.

You're not part-pooping, you're just pointing out what should be obvious.

Of course the rate is lower for BTLers. That's because for obvious reasons they have more financial/property assets and greater resources than OOs in general and recent OOs/FTBs in particular. Because they have far more to lose if they are repossessed, as the mortgage holder will pursue them for their other assets, they will cover any deficiencies out of other capital or by borrowing against other assets. If OOs or recent FTBs get into trouble, they won't have the same resources, and they will, probably, have less to lose by being repossessed. It will trash their credit rating but they may well have no choice but to be repossessed.

It would be absolutely astonishing if BTL repossession rates weren't lower than those for OOs. But it doesn't mean than some BTLers aren't hurting, just that their financial distress will be manifested elsewhere in the system.