Friday, Jul 07, 2006

Happy Birthday to the buy-to-let (BTL) mortgage

FT: Ten candles on buy-to-let cake

This summer marks the tenth birthday of the buy-to-let mortgage.

Posted by denzil @ 04:46 PM (687 views)
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7 Comments

1. uncle tom said...

Although this piece is very bland - journalistic chewing gum - do I sense a little bit of a mood change from the media recently?

It's as though doing BTL and boasting about how much money you can make is, (to use a popular phrase) 'Sooo last year...'

Given that the only thing propping up the market now is the BTL brigade adding an extra 10,000 properties a month to their portfolios, the possibility that something as ephemeral as a change of fashion could kick off the HPC actually seems quite possible.

Friday, July 7, 2006 10:28PM Report Comment
 

2. tyrellcorporation said...

Good point...

Saturday, July 8, 2006 12:47AM Report Comment
 

3. Superruss said...

UT, I agree with your comments.

This market is strongly stoked by dinner party natter, mdf renovation programs and good front pagers in the mail/bbc. Therefore, a bit of a reality check here and there from journalists whos sanity has belatedly returned could well cause the BTLers some well deserved sleepless nights and prompt some overdue panic sales.

The crash is coming. Ask anyone who really understands the fundamentals of the economic situation unfolding at the moment. It will be as the last, and the one before it - only more so - and at a quicker pace once it has got underway.

Get saving and get ready.... and do your best not to get made redundant.

With time, we will be so very much closer to our simple dreams of home ownership.

Saturday, July 8, 2006 02:06AM Report Comment
 

4. Magnifico said...


I wouldn't be surprised if the shift in perception was the result of the whole Property hype running out of steam. Obsessions ( even at social level) are all consuming, burning the fuel supporting them very quickly indeed.
Why, lately we even had the Tories jumping on the 'money isn't everything' thought bandwagon!
I personally would welcome a less superficial society, and become a punk rock boy ( with flowers in my hair).

Saturday, July 8, 2006 06:26PM Report Comment
 

5. denzil said...

Superruss said:
>>This market is strongly stoked by dinner party natter

Agreed, but not so much as it was about 2-3 years ago.
I had dinner with friends last night and the talk was seldom about property but what property talk there was was 100% bearish. Interestingly enough one of the guest is a property developer whom I know quite well as he drinks in my local. He has always been bullish about property but he actually has become quite bearish and stated that he is having to look very closely at any purchase because in his words, "2 or 3 years back I could make money from property without even engaging brain." Another couple who are very good friends are now resigned to IR increases stated that if IR's rise they will be screwed as they are maxed out already.

Regarding dinner party talk of BTL portfolios you only have to go back 6 years or so and all the talk was of dotcom stocks and how they were a sure-fire winner. The rest is history as they say.

Sunday, July 9, 2006 02:24PM Report Comment
 

6. bidin'matime said...

Recent research by Bradford & Bingley showed that the average property portfolio has increased from three per landlord in 1996 to seven this year.

Has no one at B&B thought of checking how these people will fare if interest rates rise by just a percentage point or so? B&B (through Mortgage Express) lend up to 85% of valuation. Lets assume they are lending at a level where the landlord just breaks even after allowing for expenses and void periods and that the typical BTL property has a 100k mortgage on each property.

This is in addition to their own home, which is probably mortgaged up to the hilt to meet the deposits lets assume that this is 7 lots of around 15k, or conservatively lets say 100k on top of the normal mortgage that they would have had just to buy their home lets assume that this is another 100k.

So thats a total of 900k that these guys are borrowing without the lenders blinking an eyelid! If rates rise 1%, thats 9k pa extra they will have to find from somewhere. Out of income taxed at basic rate, this would need a salary rise of over 13k gross just to stand still

Mortgage Express say they will lend up to 2m per borrower if the average is seven properties, presumably there are people out there with a dozen or so, with 2m on loan (plus their own home mortgage). A 1% rate rise is going to cost these guys over 20k pa which is sure to wipe most of them out.

It is staggering that the lenders appear unconcerned about the ability of the borrowers to subsidise these mortgage payments if and when rates rise only moderately.

Sunday, July 9, 2006 04:21PM Report Comment
 

7. bidin'matime said...

Recent research by Bradford & Bingley showed that the average property portfolio has increased from three per landlord in 1996 to seven this year.

Has no one at B&B thought of checking how these people will fare if interest rates rise by just a percentage point or so? B&B (through Mortgage Express) lend up to 85% of valuation. Lets assume they are lending at a level where the landlord just breaks even after allowing for expenses and void periods and that the typical BTL property has a 100k mortgage on each property.

This is in addition to their own home, which is probably mortgaged up to the hilt to meet the deposits lets assume that this is 7 lots of around 15k, or conservatively lets say 100k on top of the normal mortgage that they would have had just to buy their home lets assume that this is another 100k.

So thats a total of 900k that these guys are borrowing without the lenders blinking an eyelid! If rates rise 1%, thats 9k pa extra they will have to find from somewhere. Out of income taxed at basic rate, this would need a salary rise of over 13k gross just to stand still

Mortgage Express say they will lend up to 2m per borrower if the average is seven properties, presumably there are people out there with a dozen or so, with 2m on loan (plus their own home mortgage). A 1% rate rise is going to cost these guys over 20k pa which is sure to wipe most of them out.

It is staggering that the lenders appear unconcerned about the ability of the borrowers to subsidise these mortgage payments if and when rates rise only moderately.

Sunday, July 9, 2006 04:21PM Report Comment
 

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