Saturday, December 15, 2007

Turning nasty for the BTLetters

Buy-to-let financing evaporates

"The total number of buy-to-let mortgages on offer to borrowers has almost halved since July after an explosion in recent years of products that helped fuel the UK residential property boom, according to market research from Subprime buy-to-let mortgages, which cater for investors with blemished credit records, have virtually ceased to exist."

Posted by confused76 @ 10:10 AM (691 views)
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2 thoughts on “Turning nasty for the BTLetters

  • And the idea that those with BTL mortgages can keep happily chugging along in a financially secure manner is fallacy – by withdrawing finance for the scheme, the banks have reappraised the viability of the whole model.

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  • The cost of borrowing for BTL has gone up – the true cost of the best deals (after factoring in the arrangement fees) is about 6.5%, while the lenders are reining in the interest vs rent coverage, and getting more hawkish about valuations and rental value.

    This means that as the discount deals expire, a great many BTL investors will find themselves compelled to pay the lender’s SVR – which in the case of Paragon, is just shy of 8%.

    So not only will the BTL crowd find themselves unable to re-mortgage to liberate the capital they need to fund the shortfall between income and interest payments, but also, that shortfall is going to go through the roof. This will pressure many BTLers into selling some or all of their portfolio.

    Over the last few months, speculative (BTL) sales have gone from taking an extra 20,000 or so properties a month down to a position that looks to be currently flat-lining, with a resultant build-up of property for sale.

    There is now every reason to expect this sector to swing into reverse, with perhaps 20,000 properties being returned each month to the owner-occupier sector, by vendors who will get ever more desperate to get a sale.

    This volume of property will completely swamp the market – the consequences should be self-evident…

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