Friday, September 28, 2007

Buy to let bitten by credit crunch

Sub-prime fiasco impacts on buy-to-let mortgage segment

According to mortgage advisors at Moneyfacts.co.uk, the credit crunch is now starting to take its toll on the buy-to-let market. “While the prime residential sector has so far been largely unaffected by the sub-prime crisis, the buy-to-let sector is beginning to show signs reminiscent of the sub-prime market over the last few weeks with tightening credit criteria, the withdrawal of products and rising fees.” In one extreme case a lender has withdrawn all mortgage products, while several others have made all tracker rate mortgages off limits. Rental cover requirement has increased by between five and ten per cent, and arrangement fees have increased substantially.

Posted by confused76 @ 10:31 PM (864 views)
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2 thoughts on “Buy to let bitten by credit crunch

  • “However, an element of hope remains. Ms Harris said: “The outlook may not be all doom and gloom for the buy-to-let landlord as, although borrowing costs are rising, yields are beginning to fall and the potential to gain from capital appreciation is declining.”

    So what isn’t doom and gloom then?

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  • Oops a daisy!!

    The property market has wheels – first-time buyers and starter families. The property boom had a turbo-injection engine – low interest rates and BTL opportunities.

    Interest rates are higher.
    BTL. eg. the flat I am renting I am leaving cos the rent went up from £650 a month to £750 a month. Too high. An identical flat next door can be bought for £130,000. If I was a complete idiot and wished to buy the flat to let, my calculations tell me I would need to ensure a rental price of £1000 a month just to get a BTL mortgage for the place. Not going to happen.

    So that’s the engine knackered.

    What about the wheels. Largest market for first-time buyers just now are graduates with 30k to 40k of debt already. Price of starter flat. About 100k. Not going to happen.

    Starter families. Couples who five years ago bought a starter flat for 50k, now own a 100k flat. WOW!! Let’s buy a starter family home and raise kids. Price of starter family home 5 years ago was 100k, now it’s 200k. Couple may have made 50k on their flat, but now need 150k mortgage for family home. Not going to happen.

    So, that’s it. The wheels have fallen off and the engine is blown. Either prices go through the floor or no one buys a house ever again.

    The end.

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