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A new report from Moody's gives the first hint of how the removal of Section 21 will impact on BTL finance.Moody's say that, despite headwinds, landlords are very credit-worthy and BTL arrears are minimal.Coventry Building Society, for example, has provided buy-to-let mortgages against over 100,000 rental properties since 2010. It has taken losses on a grand total of four individual loans, amounting to £49,000.However, that may change due to the recent Government announcement concerning Section 21.
According to Moody’s, the recent calls for an end to so-called Section 21 evictions – which allow landlords to evict tenants without reason after a fixed-term contract ends -- is a “credit negative” for securitised bonds.From a report this week:
… they would slow a landlord's ability to evict tenants, and evictions would require a court hearing, which the Section 21 process usually does not. Additionally, a ban would limit the landlord's right to automatically evict a tenant because the landlord wishes to sell the property. These procedures would limit landlords' ability to maximise rental income, and potentially their ability to sell the property in a timely manner at the best price, thereby weakening their capacity to pay the amounts owed under the securitised mortgages.
Moody's conclude that the removal of Section 21 means that risk is increased for landlords and that could have a knock on effect as to how lender's view BTL lending.If you have not already done so, please ensure your landlord voice is heard by taking the RLA Survey into Section 21.SEE ALSO - Government announce dilution of Section 21UP NEXT - Section 21 and 6 month tenanciesDON'T MISS - End of Section 21 - "butterfly" effectNOW WATCH:
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
I said this would impact lenders !
My guess is 70% LTV will become the norm so the lender has less exposure.
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.
Someone hasn't read the proposal. It says Under the new framework a landlord will always have to provide a reason for ending a tenancy, such as breach of contract or wanting to sell the property.
Yes, I think you will still be able to evict the tenant if you wanted to move back into the property as well.
Most of the current reported sad eviction stories are because the landlord wants to sell. Who can blame them given the multiple financial and social pressures? Wanting or needing to sell will remain a legitimate reason for eviction because otherwise repossession on financial grounds will be impossible and then there will be no mortgages.
This proposal is just another example of a schizophrenic government that has no joined up policies and no consensus. There will be two losers; good landlords and good tenants. Well; three if you include lenders who need to repossess and sell.
Moody's wrong on Brexit, wrong on 2008 financial crash and wrong on Landlords.
"require a court hearing, which the S21 process usually does not"Not quite - out of 4/5 evictions ive had to have a court hearing for at least 3 of them.
"limit the landlords right .... evict a tenant .. to sell the property"Not quite - the Scotland Model. Still allows Landlords to gain possession to sell the property.
"weakening their capacity to pay the amounts owed"haha. I mean if the whole mortgage industry is built on landlords being able to evict in 2 months. Then sell a property promptly prior to house prices falling. Then we are all in trouble.
Can we please get more of this nonsense posted, it has a positive feeling on me. Making me feel more knowledgeable than I really am seeing these "experts" wide of the mark.
_________________________________________________________________________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._________________________________________________________________________