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Could we see a time where lending will get tighter than present?
Could Banks be forced not to offer Interest only Mortgages by Government Legislation and if it were to happen, could BTL survive?
Learn Change and Adapt ?????
All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.
More likely to see a maximum (much lower) LTV imposed on BTL I think, which is what they should have done in the first place instead of S24 to achieve the same goal.
The view is that Interest only is a time bomb.There is already a consultation going on about how to deal with this.If they ban it then property prices will fall as BTL landlords particularly in the SE will probably sell up en masse - hardly a vote winner and at a time when the economy needs resilience.I don't see anything changing other than more diligence on the proposed repayment method being viable and realistic.If Corbyn was PM though killing the BTL market may be his plan - redistribute the wealth to from landlords to renters!
Chartered Accountant, Tax Advisor and Mortgage broker
(and BTL portfolio owner)
You think there is something ticking, What is that? What is the risks? I dont see it and am reminded that landlords typically require 20% deposit, have an exit strategy and run as a business.
_________________________________________________________________________My posts are not financial advice but often me rambling - passing time on a coffee break.Our team at Bespoke Finance offers Limited Company Buy-to-Let and Cheap Life Insurance._________________________________________________________________________
And if Mark Carney's worst case scenario pans out. Property prices fall 30% so your 20% is insufficient. The government and BoE need to keep the UK afloat and so planning for high impact risks (however small) is important. The IO cliff edge or time bomb as it is called is an issue. They need to ensure people can refinance their IO mortgages.
Redistribution of wealth from landlords to tenants is actually Conservative Party policy, they want a "Property Owning Democracy" as people with a stake in society are more likely to vote Conservative.
Corbyn's policy is to redistribute to the State, he wants local authorities to own the housing and as many people as possible to be council tenants as they're then more likely to lean to the left.
Either way, no political party is pro BTL landlord.
BTL is mostly unregulated business and therefore the government has less to say, however recently they did make some BTL lending regulated for accidental LL.
The government will struggle to completely stop interest only mortgage and why should they for business as it is only borrowing on a assets.
In some countries BTL mortgages is not a product available and people finance their properties differently.
They say BTL is unregulated, well..
The RLA issues 300+ regulations that affect the landlord (perhaps not lending). That was wrote up before the PRA set stress tests on banks lending to Buy-to-Let Borrowers and Government increased taxation be that on Profits or SDLT, not before enforcing EPC regulations which effect lending too.
So it is a bit of a fine line, whilst they dont regulate BTL. They do regulate banks and they could require them to limit interest only borrowing or calculate it as a higher risk in there books, etc..
Its unlikely but they have the tools & they as legislators can manifest further tools in parliament at any time.
It's interesting - as you know Interest Only Residential mortgages are an endangered species? Well that was never the Government (regulators) intention. They wanted a shift, sure! they did not want the market to disappear and complained to lenders when it did. The concerns from that review was that homeowners did not have a valid repayment strategy in place, when there term came to an end.
This is different in Buy to Let, with lenders willing to mortgage you up to the young age of 120.The repayment strategy for Buy-to-Let is often simple, compared residential, in that it is the sale of the investment property.
So overall - I don't see it as a pending issue DL. ( Well unless Corbyn gets in ).
Lending is so restricted right now its ridiculous, I can I my see credit easing in the next half of the cycle as it always does.
Mr Carney and the civil service are consistent. They use models which are consistently accurate in their own terms but wrong unfortunately. Those who do degrees in Economics / econometrics can predict only that the assumptions in modelling are always abstracted from reality and winds of change always blow you adrift of where you think you'll end up. We're as likely to be better off / as well off as we are to be worse off. Self determination has more to do with it than a political dimension.
So if we think on our feet, act like decent human beings and take account of fundamentals like wages, interest rates, returns and cash flows, we can be like any other business.
I'll make one prediction - which I'll bet my house on .... after we leave the EU on 29 March 2019, the sun will rise on the 30th March 2019 and people will go to work on the following Monday etc as they always have done. Of course, the Monday after is April 1st so who knows :-)