Thursday, May 1, 2008
BoE warns BTL cannot cover investments costs- what a surprise
The BoE warned of on a £5bn-plus wave of real estate defaults which could engulf the financial sector before it has even recovered from the sub-prime crisis. Despite falls of more than 15pc in commercial property prices, banks have continued to pile into the sector and could now face significant losses of upto 10% of profits. The commercial market is in the midst of its biggest crash in more than a decade. However, banks have reported no major write-offs from the slump. The Bank warned this will not persist. The BoE also warned:- many buy-to-let investors are unable to cover their investment costs with rents and households could see their mortgage rates jump by as much as 2.5 percentage points as they are pushed onto expensive deals.