Friday, April 29, 2011

Lenders in risk aversion shock horror.

Why Nationwide prefers buy-to-let landlords to first-time buyers

There's been a few articles such as these doing the rounds recently; to be honest I can't fathom their angle. As galling as it is to hear, why wouldn't lenders want to minimise their exposure to risk of default?

Posted by sibley's b'stard child @ 11:20 AM (2123 views)
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11 thoughts on “Lenders in risk aversion shock horror.

  • Because successive government policies and economic strategies have given buy to let landlords tax bungs and tax breaks, leaving them in better financial positions whereas young people have been shafted with no jobs and disproportionate financial burdens leaving them making them less attractive credit risks perhaps?

    Maybe?

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  • They prefer to prop up btl because of the negative snowball effect of multiple ownership failier.

    Fairness has never been one of the banking sectors strong points.

    The term “Strickly business” allows one to be a total git.

    Move on!

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  • Crazycountry says:

    BUYTOiLET
    MATTHEW 5:5 : “The BuyToiLet Investor Shall Inherit the Earth”
    I sold up a few years ago and have rented a few places from these idiots. Never again and looking to buy again at any cost. They average private landlord thinks the renter is an animal to be abused. The lower the quality for the tenant the better = Better profit at all cost. You’re a problem tenant if you want a repair done. Most can’t understand simple maths and don’t even know what an interest rate is. It’s then the tenants fault who must pay for their lack of understanding of what they have got involved in. Why does the government bend over backwards to help them. I made some bad investments on shares and lost about 30k – No one put a gun to my head ( I’ve taken the loss on the chin and no I can’t afford to lose that much but it was My decission) )to make the investment yet with housing landlords must be bailed out at all costs. Too my knowlege you can’t die from a bad investment you were not forced to make.
    Let prices drop and stop meddling. A new generation of people will pick up these bad investments at a reasonable cost and take pride in their new house. I thought a recession was designed to shake out stupid investments making way for new clever, well thought out investments and businesses. Not anymore – Zombie households, zombie banks, etc is the order of the day. The reckless and the greedy must be supported at all cost.
    Oh yes, the country will collapse if house prices drop even a bit with anarchy and blood on the streets – Ask the USA or Dubai, etc, these countries have no populations now as they all killed each other when prices went down or died from lowerhousepriceitis.
    Oh, I could go on ………..

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  • Citywire article is a bit of a re-run of http://www.housepricecrash.co.uk/newsblog/2011/04/blog-nationwide-distribution-director-lays-his-cards-on-the-table-33261.php. Interesting to note that one article in a particular publication often winds it’s way into several other publications – maybe there is only one journalist opertating in the current market and the media simply re-hash the trash !

    As regards Nationwide, I guess they might look at it this way – rather than lend direct to the plumber, they lend on a BTL basis and the landlord then gathers the cash from the plumber, the landlord also takes out insurance against rental voids. In this scenario Nationwide have (1) the income from the plumber to cover the mortgage, (2) the income from the landlord if the plumber cant or wont pay (3) the income from the insurance to cover rental voids – they may argue that such an arrangement offers greater security of the mortgage being paid month in month out.

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  • mark wadsworth says:

    @ Paul 1, BTL’s do NOT get tax breaks relative to an owner-occupier.

    Sure, they get a tax deduction for interest paid BUT ONLY again the rental income (and not against other income) so by and large their income tax bill is either POSITIVE or ZERO. Seeing as owner-occupiers don’t pay tax on their rental income, why should they get a tax deduction for the interest – their income tax bill is always ZERO? Further, BTLs have to pay tax on their capital gains.

    The council tax, SDLT and Inheritance Tax position is much the same as between BTL and owner-occupiers.

    It is true to say that BTLs pay much lower tax rates than ordinary employees on their employment income or other businesses on their business profits, maybe less than half as much, but that is a different topic.

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  • dohousescrashinthewoods says:

    “why wouldn’t lenders want to minimise their exposure to risk of default?” – a couple of years back lenders started shunning over-leveraged, multi-property BTL landlords because they were perceived as higher risk of defaulting on not one, but many, loans.

    Either way, a couple of notches on IRs and Kansas will go bye-bye – both of them.

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  • @mark

    I know that BTL landlords don’t get tax breaks relative to owner occupiers. The government can’t give tax breaks to groups that don’t receive any income from their purchase so don’t pay tax. Both FTBs and BTL landlords are however competing to buy property and BTL are quite clearly winning out right now.

    BTL landlords do get tax breaks which do enrich them, leaving them in a better financial position relative to FTBs looking to buy the same property. Combine this with various economic policies which have impoverished the cash-rich and property poor (i.e. the young) along with the strategy to promote low interest rates over growth and jobs and you get a group of people who cannot hope to take up the slack in demand for housing at the prices currently being asked for.

    Hence the government chases BTL landlords with tax breaks, preferring to leave FTBs where they are.

    THAT is the reason Nationwide prefer BTL landlords – they are in a far better position due to government policies than FTBs.

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  • It’s a ponzi scheme and you ain’t in it. simples!

    Be thankful for small mercy’s. Remember, Jesus kicked the money changers out from the temple,

    Those who refuse to play are on the righteous path. Financial freedom is a funny old thing.

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  • Jack C
    Interesting points, it does make you wonder if BTL is in actual fact here for the long term.
    They do currently seem to be surviving.
    I also suspect that rents will increase with interest rates and would be FTBers will have to down grade their expectations still further.

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  • mark wadsworth says:

    BTL landlords do get tax breaks which do enrich them, leaving them in a better financial position relative to FTBs looking to buy the same property.

    No they don’t, BTL does not get tax breaks relative to owner-occupation, which includes FTB. Whether you love or hate BTL, there is no point going round saying that they get tax breaks, because they don’t.

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  • it_is_going_with_a_bang says:

    What point is being made here?

    That a bank prefers to lend at 75%ltv than 95% ltv?
    That it charges more fees for landlords and hence makes more profit from its investment.
    I don’t see that banks have any agenda more than they usually do which is to make as much money as possible out of whoever they can.

    Hardly news is it.

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