Saturday, Nov 14, 2009

Buy to let meltdown yeeesss

Daily mail: Mortgage arrears of couple who rode the buy-to-let boom estimated at £350,000

Earlier this week, it emerged that the Wilsons are not the only members of Britain's army of landlords who may be struggling, with the number of buy-to-let repossessions doubling to 1,600 between July and September compared with the same period last year.
Just weeks ago Mr Wilson issued a bleak warning to his fellow landlords: 'We are reasonably safe, I think. If we go under, then everyone's going under.'

Posted by sold out @ 02:26 AM (3327 views)
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44 Comments

1. jackas said...

Live by it.

Die by it.

Saturday, November 14, 2009 02:54AM Report Comment
 

2. honest valuer said...

Day of reckoning getting closer.

Two miliion pouind mansion!! It was worth 495,000 in 2007 and is mortgaged. Allmwill shortly be revealed!!

Saturday, November 14, 2009 04:37AM Report Comment
 

3. hpwatcher said...

HAHAHAHAHAHAHahahahaahahhaahahahahahhaahahh

Saturday, November 14, 2009 06:23AM Report Comment
 

4. Ndg said...

So, Mr. Wilson is flush but an 'innocent' victim of the postal strike (not one of those 'guilty' victims). Cheque's in the post. Yeah right. Good luck Mr. Wilson.

By the way, nice accompanying photograph. But why was his wife wearing a tie?

Saturday, November 14, 2009 07:12AM Report Comment
 

5. Honest Valuer said...

Usual bluster and ideas of grandeur from Fergus. Just like Robert Maxwell right to the end.

Saturday, November 14, 2009 07:39AM Report Comment
 

6. phdinbubbles said...

"Racehorse fanatic Mr Wilson, 61, says he is an innocent victim of the postal strike. Unusually, he pays his mortgage by cheque - and says the money has been delayed in the post. He insisted recently: 'We are not a penny behind on our loan payments.' This week, he admitted receiving letters threatening repossession, but said: 'There are still a lot of cheques in the post. This takes time to process on the bank's side and this can come up as being in arrears when we are not.' "

Hilarious - I almost choked on my cornflakes. What's his next excuse? - the cat's eaten it? Surprised he's got time for racehorses anyway, with having to write 700 cheques a month.

Oh, I do so hope this is true and they end up with nothing (as predicted by many on here).

Saturday, November 14, 2009 07:57AM Report Comment
 

7. bidin'matime said...

It would be the ultimate injustice of the government's meddling in the market if these people were to get away with it - at our expense. They deserve what is coming their way.

Saturday, November 14, 2009 08:03AM Report Comment
 

8. yoyo1 said...

The properties acquired in 2003 are now worth less than the price paid back then, i.e. values are currently at 2002 levels. Remember this is supposed to be a thriving area.

Saturday, November 14, 2009 09:07AM Report Comment
 

9. honest valuer said...

I fell out with Wilson about seven years ago over the 'value' (capital and rental) of a property and have been waiting for this day ever since. But of course Fergus will handle all of this with his usual Robert Maxwell style of bluster and ideas of grandeur - deja vue Grant Bovey?

Saturday, November 14, 2009 09:34AM Report Comment
 

10. tyrellcorporation said...

Could be very interesting if this guy went under. Surely this would be splashed on every front page as they typified the BTL mania promoted by Labour over the last decade. We could yet see a flood of BTLs onto the market this Spring. Cue crash!

Saturday, November 14, 2009 09:39AM Report Comment
 

11. Alan Lubin said...

Oh happy days. I don't normally believe anything i read in that rag but i'll allow myself this one as a guilty pleasure. Is it too early in the day to crack open the champers?

Saturday, November 14, 2009 09:50AM Report Comment
 

12. techieman said...

i think the best is the comment by one guy which sums up the ponzi scheme, sorry BTL investment.

"I have a modest buy-to-let portfolio worth a few million, and I know many investors who have similar size portfolios.

Unlike me though they are all technically broke and have worked for the last ten years for nothing.

That is because they all succumbed to the mesmerising talk of the banks and kept remortgaging to buy more and more property. When the crash came they were all highly geared and the 25% fall in values took them into negative equity. They all ignored basic business principles to get rich fast and the banks encouraged them because the decision makers had to meet tougher and tougher targets to get their bonuses. Like moths attracted to a flame. I hope the lessons will be learned but I doubt it."

A long while ago i used some numbers re people buying the FTSE index to illustrate exactly how it can go wrong.

The problem is no market goes up in a straight line and even if the move down were just a counter-trend move against the prevailing bull trend rather than the start of a bear market, then these people (the weak buyers) will be farquaharsend since the supports of yield, and capital gain both evaporate. The only thing keeping them alive now is low debt servicing.

Saturday, November 14, 2009 09:50AM Report Comment
 

13. techieman said...

Having said all that i just want to clarify my position. Assuming you want to provide social housing via a BTL market then BTL in of itself is NOT a bad thing. IF:

1. There is effective support for both tenants (against not being provided with the service they have paid for) and LLs (not losing out when a tennant does a runner).
2. A reasonable, but not excessive, gain can be made - to enable the landlord to provide investment in his own properties and/or expand his portfolio.
3. Regulation that supports 1. and 2. - for example HB that is reflective of the market not that provides a floor for it.

The bloke who made the comment sounds like a "professional". You must not over-gear, and must do your homework to pay the right money for the properties. (don't fall prey to an over-valuation scam).

The problem is any long term bull market always attracts the belief that it will go on in perpetuity. That's why when it turns (and it doesn't have to turn much) you get the madoffs and the wilson types in trouble.

The problem with the Wilsons is basic human nature - they got greedy. Personally im not sure i trust the valuations in the article, but i could be wrong - honest valuer?? By that (assuming i am right) if they stopped a while back they would have some equity, and some nice positive cash flow. They have overcooked the goose.

Saturday, November 14, 2009 10:06AM Report Comment
 

14. garch said...

One can only hope.

Although the complaints about the post actually sound quite plausible to me. I've had stuff go missing for weeks recently.

Saturday, November 14, 2009 10:13AM Report Comment
 

15. jack c said...

There has been a fair bit of reporting and debate about the Wilson's on this blog in recent months, so it comes as no real surprise to hear that Fergus & Co are allegedly struggling. It was obvious from a recent radio discussion that they were effectively being kept afloat by historically low interest rates.

There are several factors starting to stack against the Wilson's the main ones being

(1) The facility to re-finance the existing BTL portfolio is probably (in my experience) non existant at present - too many lenders have exited the market and those that remain have a cap (generally by number of properties) on BTL lending - so they are stuck with what theyve got.
(2) When times get tough you suddenly find property is a high risk investment due to lack of liquidity
(3) UK Interest rates (base rate) is historically low @ 0.5% and a rise by 2% in the next 12-18 months would not be out of order - I hope the Wilson's will correct me if my calculations are wrong but that's a 400% increase !

Saturday, November 14, 2009 10:39AM Report Comment
 

16. sovietuk said...

Maximum delay I experienced during the postal strike was 2 working days. Critical payments should be done electronically, DD or SO. Letters from banks and utility companies always seem to arrive on time ?!?!

Saturday, November 14, 2009 10:46AM Report Comment
 

17. tyrellcorporation said...

@Techieman 'Assuming you want to provide social housing via a BTL market then BTL in of itself is NOT a bad thing. IF'

The trouble is that BTL/social housing just isn't needed if houses more accurately reflect incomes - ie, they're affordable. The rise of BTL has in turn 'developed' it's own market place, it's self fulfilling. If these large investors are in trouble this can only be good news for FTBs in the long run.

Saturday, November 14, 2009 10:52AM Report Comment
 

18. The Baldman said...

Do you really believe he pays mortgage by cheque unless he is in arrears and has to stop the DDs. Looks like a cheap portfolio will be up for sale soon.

Saturday, November 14, 2009 10:53AM Report Comment
 

19. will said...

Selfish Wilsons empire in the balance. Did they ever consider the effect of denying families in Ashford the opportunity of owning a home.
Their epitath should read ' here lie the greedies'.

Saturday, November 14, 2009 10:54AM Report Comment
 

20. wdbeast said...

techieman - "They have overcooked the goose"

Quite so, like many BTL investors.But even worse they have all their properties in the same market, Ashford.
So when they come to sell, or are forced to, they will depreciate their own assets through forced sale.
Brilliant business planning Mr Wilson, brilliant.

honest valuer – good to hear first hand that he is an arrogant plonker, it makes disliking him easier.

Saturday, November 14, 2009 11:02AM Report Comment
 

21. letthemfall said...

BTL has become synonymous with foolish greedy people, but techieman is right that there is a place for property owners letting out because there will always be people who want to rent. Thus it is a useful service and has value in itself.

What has happened in the last few years is a transfer of wealth, with attendant social and economic disruption. Stock market bubbles don't in general affect individuals who choose not to participate; this bubble has, but hopefully we will see the great wave of money lap back towards the rest of the populace, leaving the likes of the Wilsons high and dried out on the shingle.

Saturday, November 14, 2009 11:09AM Report Comment
 

22. stillthinking said...

The Wilsons won't be paying off any losses they incur, the taxpayer will.

Saturday, November 14, 2009 11:22AM Report Comment
 

23. techieman said...

TC @ 14. If you have people on benefit you have to house them somewhere. You are always going to get some people who have no money. It would be interesting to know the ratios of people in social housing that are housed by local authority and those housed by BTLrts or any other private sector support. It would be a nice graph to chart that over time.

Im not sure my point re Housing Benefit doesn't deal with your point though. We will always need SOME social housing - whether that's in blocks of flats provided by local authority / central government or via the private sector (and im not actually advocating one over the other). Its how the rest of us pay for it (increase taxes that fund the state funded method OR by having to pay increased values to "compete" with the floor established by HB OR BOTH) thats the issue.

Or have i misunderstood you?

Saturday, November 14, 2009 11:52AM Report Comment
 

24. a saver said...

If there weren't so many people ramping property and creating a belief that HPI is on again, more people with BTL portfolios might think about selling up some of their properties, albeit at a loss. What's a 10k loss now compared with a 30k loss later on?
This recent bounce has given the over-indebted an excellent chance to sell up but it looks like many are hanging on in hope.

Saturday, November 14, 2009 12:07PM Report Comment
 

25. tyrellcorporation said...

@ techie

you'll always need a safety net of social housing but my point is that a vast number of people are now effectively forced to rent because the speculative BTL army (who, lets face it were driven more by capital gain than rental yield) pushed prices too high for most FTBs.

I just don't think BTL offers any real social benefits, in fact I'd say it's totally detrimental. Before the BTL mania blew up in the late 90's I can't remember any real problem with mass homelessness because there wasn't sufficient rental property or social housing.

BTL has created a need where there wasn't one before IMO.

Saturday, November 14, 2009 12:40PM Report Comment
 

26. greenshootsandleaves said...

Here's another one worth trying, Fergus: a Russian oligarch's written offer to buy your entire BTL empire (at close to the asking price, of course) is also in the post.

On a more serious note, though, what do HPCrashers think will happen if a large chunk or even all of the properties end up being repossessed? Will the lender(s) hold one huge auction, sell them off piecemeal or just sit on them (a microcosm of what is happening nationwide)?

Saturday, November 14, 2009 12:43PM Report Comment
 

27. techieman said...

TC - i would agree on some of this. The state has basically contracted out of social housing to the private sector. As the state stopped building new social housing, they rely on the BTL. I agree that a balance should have been struck within the procurement so that a giant bubble wasnt created / added to. But that i am afraid is the nature of bubbles.

The whole think makes sense as an investment if the yeild + cap gain together is positive. If the yeild is positive then i makes sense for the "professional" who would add to an efficient market.

Once people rely on CG (as you say i agree with that) and the yeild makes no sense as places are bid up, then the bubble will eventually be exploded. The fact that BTLrs can hold on by their fingertips is because of the low IRs. So the net yield still probably just keeps them above water.

As Jack says when they come to remortgage that is a problem, particularly if the rates are increased. Then there will be the probability of a capitulation.

Perhaps rates can stay low though, after all the banks must know this would be a race to the bottom if they took out their own collateral (or lack of it). How this pans out is of interest.

Saturday, November 14, 2009 12:49PM Report Comment
 

28. cyril said...

BTL is ok but it all got a bit out of hand when the bubble blew up. The govt should have done something to calm the housing market but it didn't, and now we are stuck witht he consequences.
In France the government subsidises BTL - but then they don't generally have the same sort of problems with house price inflation as the UK.

Saturday, November 14, 2009 12:49PM Report Comment
 

29. techieman said...

Will the lender(s) hold one huge auction, sell them off piecemeal or just sit on them (a microcosm of what is happening nationwide)?

That depends on if there are any indemnities attached. Thats one for Jack as some of the places may have Mort Indenmnity. If so then they are obliged to mitigate the loss so that the insurance company pays them as little as possible. That would mean an immediate auction unless the insurers tell them otherwise.

If not then the banks would probably drip them but for a couple of hundred a month through different auctioneers. 30 here 20 there etc. Of course that assumes you are only refering to the Wilsons, and it would depend on if there are other properties / portfolios going under and where they are.

But i suppose we would cross that bridge when we come to it.

Saturday, November 14, 2009 12:55PM Report Comment
 

30. techieman said...

"nice one cyril"

Saturday, November 14, 2009 12:56PM Report Comment
 

31. wally said...

Sadly, I feel the country is on the same trajectory as the Wilsons.

Saturday, November 14, 2009 12:57PM Report Comment
 

32. mander said...

I guess The Wilsons are still waiting for the Russian investor and Mervyn King is still waiting for the inflation to kick start. Both can not accept the reality and instead people have to accept loosing their jobs because there is not a fully functional housing market which affects the economy as a whole.

Saturday, November 14, 2009 12:57PM Report Comment
 

33. icarus said...

A very selective postal strike if the bank's FINAL warning letter got to FW before his cheque reached the bank.

Saturday, November 14, 2009 01:14PM Report Comment
 

34. taffee said...

I heard grant bovey was gonna buy the lot,spend billions on refurbishment,then put back on the market for 15% higher

seems like a great plan grant....I'd add marble bathrooms for that extra achieved price

Saturday, November 14, 2009 01:28PM Report Comment
 

35. icarus said...

...and if their cheques to Armani and Gucci had got through they'd be wearing stylish outfits and accessories.

@30 - sounds a good idea - lot's of unrealised profits in that one.

Saturday, November 14, 2009 01:34PM Report Comment
 

36. taffee said...

heal sold for £1...from lsl I found they lost £21 mill 2006...£24 mill 2007 and £51 mill 2008...HBOS looks like one big fraud/basket case to me run my children

Saturday, November 14, 2009 01:43PM Report Comment
 

37. greenshootsandleaves said...

taffee@30 'I heard grant bovey was gonna buy the lot,spend billions on refurbishment,then put back on the market for 15% higher seems like a great plan grant....I'd add marble bathrooms for that extra achieved price'

Careful there taffee! Wasn't grant in the habit of paying £hundreds of thousands for that kind of expert advice (can't for the life of me remember who the expert was, though) and there you go, providing it free of charge!

Saturday, November 14, 2009 02:10PM Report Comment
 

38. shining wit said...

But.....But....Surely.......House prices are rising, aren't they? How on earth do you get into trouble like this when house prices are now 4% higher than in 2008?

Is someone telling porkies ? The great british house price swindle goes on.

Saturday, November 14, 2009 02:32PM Report Comment
 

39. greenshootsandleaves said...

techieman@25 [on whether, in the event of a massive repossession, the lender(s) would hold one huge auction, sell the properties piecemeal or just sit on them]

Thanks for exploring those scenarios. The fact that the properties are concentrated in quite a small area would appear to pose massive problems whichever option the lender(s) chose. For instance, drip-feeding that little lot onto the Ashford property market could take ages!

Saturday, November 14, 2009 02:35PM Report Comment
 

40. confused76 said...

Meet the Fokkers!

http://www.thisismoney.co.uk/mortgages-and-homes/buy-to-let/article.html?in_article_id=455442&in_page_id=56
http://www.guardian.co.uk/money/2008/oct/04/buyingtolet.property
http://www.thisismoney.co.uk/mortgages-and-homes/article.html?in_article_id=493865&in_page_id=8&position=moretopstories

UAHHHA HHAHAHHA H AHHAHAHHAH HAHAHHA

Saturday, November 14, 2009 05:24PM Report Comment
 

41. confused76 said...

Hear the King himself in a rare interview

http://www.hip-consultant.co.uk/blog/the-buy-to-let-kings-secret-avoids-flats-123/

"The interview is full of some great quotes which can certainly not be described as politically correct. However, Fergus Wilson could not be accused of not answering the questions poised"

Saturday, November 14, 2009 05:26PM Report Comment
 

42. jack c said...

@ 25 techieman (Saturday, November 14, 2009 12:55PM) - In fairness I cant comment accurately on the Wilsons situation as we dont know their precise circumstances, however it is very likely the the BTL mortgages they hold would not have had a HLC (Higher lending charge) applied and therefore no MIG (mortgage indemnity G'tee) will be in place (this of course protects the lender not the borrower although it is the borrower who pays the premium). I have just checked the latest edition of Business Moneyfacts in respect of BTL lending and established that only one lender from those currently active in the market currently imposes a HLC.

If the lenders do elect to take posession of one or more properties then it is my understanding that they must look to achieve the best possible price (even by auction) - The FSA treating customers fairly initiative immediately springs to mind. I cant therefore see how the properties could be drip fed into the market but I'm open to debate on this aspect.

Saturday, November 14, 2009 05:31PM Report Comment
 

43. voiceofreason said...

Nice to hear your manic laugh again confused76....

Lets get this flippin' election out of the way, get rid of Brown and Darling's market rigging and leave the economy to find proper levels.

Saturday, November 14, 2009 09:06PM Report Comment
 

44. mark wadsworth said...

oh dear, it appears I did Confused76 a disservice on a later thread, he has served his trademark laugh.

When we last took the P155 out of the Wilsons a couple of weeks ago, we had sort of given up hope that they'd crash and burn this quickly, but they did. Glorious.

Saturday, November 14, 2009 10:29PM Report Comment
 

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