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OK not to be melodramatic about this but actual DOOOOOM right?
Donny Darko's … 26 May 23 06:41
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So mortgage interest rates are spiking again. The SVR's (or whatever they are called these days) of most banks are now north of 6% and the affordability nonsense for re-mortgaging doesn't seem to have been sorted out. People are going to be utterly fvcked as they roll off their fixed rates. Even for those who can get a deal it is going to be north of 5%. That means people are looking at their mortgage interest payments going up by something like 250% to 400%. 

I just don't see a way we avoid mass repossessions if rates stay this high over the next 12 months. The rental market is still incredibly tight as well so landlords are going to look to push at least some of the cost increase (much of which is not tax deductible) onto tenants. 

The press are surprisingly quiet about this.  All the focus is still on food costs and energy bills which I guess reflects the boomer bias of our media but this is surely going to wipe out vast numbers of Gen X and down.  

Yeah Tories really screwed this one 

I think a lot of people will be forced to sell and downsize (a lot of whom will have upsized in 2020 and onwards) 

The hope is they have enough equity in the gaff to move or at least fixed long and strong (as Davos always advises) at a rate they can afford 

Think GC said go short term fix

it's a bit hard to be sympathetic to anyone who thought crisis level interest rates were going to last forever, 5% is not an unimaginable rate to see 

that said, it is a bit worrying that it has come up to about 5% in 1 year and yeah, my lack of sympathy doesn't stop that there is probably a fair bit of economic knock on coming down the track if everyone is paying off mortgages and food and not buying cars and dresses

"it's a bit hard to be sympathetic to anyone who thought crisis level interest rates were going to last forever, 5% is not an unimaginable rate to see "

Fine for middle aged lawyers with big earnings

Lots of people don't have such backgrounds 

it's a bit hard to be sympathetic to anyone who thought crisis level interest rates were going to last forever, 5% is not an unimaginable rate to see 

Why is it hard when they are forced to take out massive mortgages or pay enormous rent if they want somewhere decent to live because of our sh1t rigged housing system?

But it is true, people out spending. Can barely move in pubs and restaurants

Presumably shops the same although I don't personally know 

So plenty of cash about 

Yeah it’s pretty fvckd and I’m very empathetic. Know lots of people impacted and we are also renewing this year and our mortgage is doubling in monthly payment.

I've decided to liquidate some stuff to pay off my second mortgage, which is coming up for renewal at the end of the year 

Paying a load more seems pointless 

Might sell a gaff to sell off the primary mortgage as well 

This is privilege 

So the usual fibs then, but clergs makes a good point about spending. What are the consumer credit figures? I sense a lot of ppl have borrowed to enjoy themselves with no hope of staying solvent past the end of this year. 

What fibs cookie? I can’t see anyone lying on here just sharing their personal experiences of how rare rises are or are not affecting them and their community.

donnie is right, many will be utterly fvcked by this in combo with inflation, food prices, energy and the rising cost of literally everything - there’s no offset item to make a saving anywhere unless you withdraw from tertiary altogether 

In possibly the only decent financial decision I've ever made, I fixed at 2.4% for 5 years last year. And yes, everyone else fixed at 1.99 etc. 

 

I'm hoping this will see me through the worst of it. No doubt it'll be 12% in 2027...

Incorrect runners knee. Current rate rises have seen most monthly mortgage repayment sums double. That’s massive for nearly every single household it affects 

bUt WhAt AbOuT iNtErEsT r8s iN tHe 80s?

Even then repayments as a proportion of income weren't as crippling as they will be now. A lot of people are going to get properly fooked by this unless rates come back down again and quickly. 

There will be BTL landlords on 85%+ interest only mortgages who are going to get fooked 6 ways to Sunday as the rental market won’t support them pushing down those sort of increases. RIP. What a pity. Never mind. 

The pain elsewhere will take longer to unwind. There will be huge upward inflationary pressure on wages again as it does. This is why the government is so keen to break the back of fuel/energy inflation now, as they don’t want mortgage rates compounding the issue in 18 months when there’s a GE.

They’re completely toast, obvs. 

For every btl landlord there’s a tenant or family that will get fvcked if the landlord gets fvcked and withdraws. What happens to the landlord and the tenant?

im a landlord. I have tenants. If I have to sell they have to move. Their rent is a good price and the property is lovely. Maybe in London not so much an issue but I have friends in the regions who really struggle to find rental properties so if there’s a mass exodus they will likely end up homeless 

Threeepwood26 May 23 07:56

Why is it hard when they are forced to take out massive mortgages or pay enormous rent if they want somewhere decent to live because of our sh1t rigged housing system?

___________________________________________________________________

yeah, the housing market is rigged and shit and there is a real issue with the amount of housing being built just so foregin despots can hid cash in the UK 

but it is still tough to feel bad for people that want high, perpetually rising house prices and are just now finding out that it costs something, a bit like when the GFC wiped out the hordes of house flippers

on the flush cash in shops etc, I wonder if that is the return of tourism

One more the most odious things about this was the way the Bank of  England dropped the stress interest rate test for lenders when assessing prospective borrowers’ ability to repay a mortgage before they put the interest rates up so high.
 

When they dropped that test interest rates were 1.25%

OB you can sell with the tenant in situ and plenty of well set up landlords who are staying in the game who will be looking for opportunities.

At least for people re-mortgaging now their energy bills coming down will offset some of the rise in mortgage payments unlike people at the end of last year watching their mortgage payments double as their electricity bill doubles.

some context

 just don't see a way we avoid mass repossessions if rates stay this high over the next 12 months.

in practice getting repo from owner occupiers is very convoluted and takes up to 2 yrs if not more

coupled with lack of housing in many places and council policy, a lot of people will drag out repo proceedings. the lenders will also be keen to negotiate payment holidays for fear of crashing the market

The rental market is still incredibly tight as well so landlords are going to look to push at least some of the cost increase (much of which is not tax deductible) onto tenants. 

what will happen is a further tightening of supply in the face of rising demand - so in the short term rents will increase but we will also see rising defaults

in the medium term more individual private landlords will exit the market and until the void is filled by big BTR or institutional landlords we are in for a rocky ride

the way things are headed we may get rent controls or something like that

 

BTL in this country is broken

so many people owning BTL properties on variable mortgages who are highly leveraged and highly vulnerable to even tiny increases in interest rates

and they have the temerity to complain when rates go up and say they shouldn’t because this would harm their tenants (because they would “have” to sell)

basically when times are good these people want to ride the wave and reap potentially massive upsides but when times are bad they demand special protection

I say this as someone who is a landlord btw

Sails - it's not easy to sell with a tenant in situ though (and some BTL mortgage lenders don't really like mortgaging properties with sitting tenants). Preference generally is VP (although it is maybe going to change with the new reforms coming through). 

Not many people are going to be willing to buy off a gross 2% or 3% yield when gilt yields are at 4% and you can get 5% in a bank account. Either market rents have to rise or prices have to fall. In central London it will be a bit of both. Elsewhere I think it is likely to be largely price falls. 

What you will see is Landlord's getting much more aggressive about pushing those who are paying under market rent currently (because they have been there a while) to pay more. A fair number of landlords aren't that bothered about income provided a property is washing it's face. They are really about the long term capital growth (and taking advantage of currently negative real interest rates). That will change once they can't cover their costs though. 

There will be BTL landlords on 85%+ interest only mortgages who are going to get fooked 6 ways to Sunday as the rental market won’t support them pushing down those sort of increases. RIP. What a pity. Never mind. 

Yes - if they were consumers I would have sympathy but these are highly risky business operations. Let them fail.

There is no way out of this without

i) a massive government-funded housebuilding programme - (ideally social housing) to upwards of say 500k houses a year (not “affordable housing” which is a scam)

ii) expansion of institutional resi landlord involvement in the market (who don’t sell up for VP and who invest in the property more - it needs to be in at least ok nick otherwise it will depreciate as an asset vs a BTL pensioner or working person who tends not to care so much about repairs as the future buyer may want to gut it out and redo it)

iii) better dispute resolution (a better funded L and T claim track in the courts plus compulsory mediatin process would be a start, plus beefed up enforcement processes too)

iv) more stringent stress tests on mortgages of all kinds

v) getting rid of right of buy

 

I do plenty of sales with tenants in situ and it's funny as that's the default position in commercial property and values are actually driven by the rent rather than other factors.

OB there was that huge spike in interest rates in the autumn and for a brief while some people simply couldn't remortgage and even with higher base rates mortgage rates are still lower than at the end of the last year.

Also bear in mind that if your interest doubles your payment only doubles if you're interest only.  If you're on a repayment mortgage it's only the interest element that increases so if my interest rate tripled it wouldn't actually double the overall monthly payment.

Also bear in mind that if your interest doubles your payment only doubles if you're interest only.  If you're on a repayment mortgage it's only the interest element that increases so if my interest rate tripled it wouldn't actually double the overall monthly payment.

Sails - interest only mortgages are worryingly common still

I know a few family friends whose parents are now semi retired in their late 60s on these - that’s their retirement gone

(of course they should have probably had a back up and saved more while working instead of paying a v low mortgage for 15-20 years and bank on 15% house price growth per year for infinity to pay for the balloon repayment and their kids inheritance and their care costs)

im a landlord. I have tenants. If I have to sell they have to move.

this should be made illegal

tenants rights should trump landlords profits

if the price comes down selling with tenants in situ that’s a good thing

Presumably the big banks are going to be leaned on by the govt to be fairly lenient in terms of repossessions etc 

What about all those PE investments leveraged at 2% pa in 2020/2021. They arent looking particularly healthy in a 5.5% environment

when times are good these people want to ride the wave and reap potentially massive upsides but when times are bad they demand special protection

This is no different  to busines people in any other industry though.

regardless of government pressure the banks have zero interest in repossessing anything. everything will just get deferred or extended except the most extreme cases of non-payment.

banks do not want to own houses

In fact when you look back at what happened during Covid, the only people who didn't gey any help or special protections from the government were landlords.

Maybe they couldn’t afford the back up Jamie

all of the above comments are largely predicated on a large volume of spare cash swashing around which most people do not have 

 

What volume of private rentals are via landlords with small volumes of property ie 1/2 - a lot I should imagine. If you fvck them all out of the market who benefits ? The tenants ? Hardly. The landlords aren’t faceless corps they’re likely your peers or family or other pensioners who’ve tried to take their fate out of the state and be sensible and have a lay income especially when interest rates were so low saving in an account didn’t yield much if they had a fixed sum on retirement and rent provided almost an annuity 

I'd agree with Sails that there isn't anything inherently problematic about selling a property with a sitting tenant and I have seen quite a few of these (mostly auction purchases but a few by normal private sale). 

If things do get bad in terms of repossessions, there may be more of the "lifeboat" type schemes where were proposed during the 2009 recession but didn't really gain much traction as the banks didn't seem to have much appetite for repossession (whether due to low interest rates or otherwise). The schemes I saw were basically an RSL would agree to buy the distressed property at its then market value and that sum would be paid to the lender (who would take a bath for the balance of the mortgage) and the RSL would then grant a tenancy to the former owner (I think initially for 12 months but can't recall exactly). Given the shortage of social housing, you may see the government (especially if Labour come to power) treat a crash as an opportunity to get some more social housing stock on the cheap. 

On a personal level, taking a 10 year fix in 2019 looks like it may have been quite a good decision (I can't claim any kind of foresight, I just wanted certainty about what my payments would be). 

💯 because corporates are known for being kind to the customers (tenants in this case) aren’t they and oh so likely to arrange for things to be fixed quickly or understanding about changes to tenancies or issues with payment 

Kaul is right to raise the real issue, which is BTL landlords; but it is absurd to think that anyone other than the bottom of the food chain, i.e. the renter, will get shafted.

It just looks like the proportion of housing cost as a % of total income has stepped upwards.  FWIW I thought the UK had relatively (to e.g. Germany) low housing costs 

Unless you are repaying over a very short period of time (or are on a sub 1% rate) then a tripling of mortgage interest would typically double your monthly payment sails. Keep in mind in the early years of a 25 year amortising mortgage the capital repayment element paid each month is relatively small.  People who have bought in the last 5 to 10 years are going to get absolutely clobbered.  Also repayments don't need to double for it to push people over the edge. Most people are much closer to the edge than that. 

Rent control is never anything than a very temporary sticking plaster and introducing it would pretty much kill any prospect of the big institutional landlords everyone seems to want to take over actually coming in and taking over. 

Ultimately there is a massive housing shortage. Nothing other than releasing lots of land on which to build lots of (good quality, liveable) homes will make any significant difference long term. It's perfectly doable. There is plenty of space, it just takes government will. 

The landlords aren’t faceless corps they’re likely your peers or family or other pensioners who’ve tried to take their fate out of the state and be sensible and have a lay income especially when interest rates were so low saving in an account didn’t yield much if they had a fixed sum on retirement and rent provided almost an annuity 

Our peers and pensioners should have bought shares/trackers or commercial property if they wanted to "invest", instead of hoping to capitalise on the misery and desperation caused by a criminal scarcity of and quasi ponzi scheme comprising a basic requirement for a dignified human existence. Fvck all landlords except maybe accidental ones, profiteering arseholes hoarding grain during a famine. There is no ethically acceptable landlord except a government-licensed, publicly-owned service provider renting housing on a not for profit basis. 

Not sure it is that bad from a mortgage perspective. 5 year fixes started being taken in 2018 and now dominate (from maybe 10-20% of the market then to more like 80+% now. That means most are not worried about remortgaging now. Also 35% of dwellings are owned outright, and high loan to income loans (>3x for couples or >4 times for individuals) only represent 50% of the remainder. 

The bigger issue is Davos's one. Despite the dancing about retail sales, volumes are still below 2019 levels. Comm prop is dying on its arse as the economics don't stack up at current lending rates, and credit availability will mean there is less professional work going round. Job vacancies are plummeting. The BoE's actions have torpedoed consumer confidence in my view. I'd be sharpening your restructuring skills if you work in anything transactional or looking for work if you joined a US firm post March 2020. 

Windy Miller let me help you understand.  It was called "mortgage rescue" courtesy of Mr Brown.  The Housing Association had to stump up 50% of the cost, the st8 funded the other 50%.  The only terms were the tenant should be given a minimum of 3 years in the property or the 'grant' would become repayable 

Thanks Piechucker, I couldn't remember the details. 

From what I can remember, there was a bit of a fuss made about the scheme only being used for a very small number of houses compared to the estimates at the time the scheme was announced. I suspect a lot of lenders didn't want to consolidate their losses and were content to sit on arrears for a time in the hope the market would improve and they could recover the full arrears on a sale. 

Threep, how virtuous of you.  If all housing was a reasonable standard (let's say Decent Homes standard) then capping rent levels may work  

It is actually quite foolish to assume that xyz Council or xyz Housing Association provides housing to the correct standard.  Read some of the Regulator of Social Housing's reports and you will see otherwise

There are many good private landlords that keep the properties in great condition which improve the lives and prospects of their tenants 

Interesting how anti landlord some of rof is. Even though if they are fooked tenants will get fooked more. Plus would imagine the vast majority of landlords would earn far less than the rich roffers slating them.

Outside of a chill style commie utopia wouldn't individual landlords being wiped out just make renting even harder?

Also bear in mind banks cannot afford assigning 100% risk weighting to loads of defaulted mortgages, so will go out of their way to kick the can down the road. You will find lots of people allowed to go interest only or take contractually agreed repayment holidays. 

 

 There is no ethically acceptable landlord except a government-licensed, publicly-owned service provider renting housing on a not for profit basis. 
can you give me some examples of where that’s happening successfully? or other govt. licensed, publicly owned, not for profit organisations?

Outside of a chill style commie utopia wouldn't individual landlords being wiped out just make renting even harder?

why clive? if you make private renting unprofitable, they’d all just have to sell their second or third homes 

flood the market, drive down housing prices

the houses would still exist for rental or purchase

piechucker’s “There are many good private landlords that keep the properties in great condition which improve the lives and prospects of their tenants”

out of 14 properties I rented in before buying (from the ages of 18-29), 12 were qunts - slow with repairs due to “not being able to afford it” or their managing agents being shit. Some refused to do basic repairs or reneged on agreements - knowing that moving was a hassle. Half of them asked me to move after the initial fixed term (6 or 9 months) were up as they needed to sell up - my moving costs really stacked up. Three refused to give references after I challenged deductions to the rent deposit for things like “scratch on ceiling” etc. 

they happened to be the individual BTL landlords - some absentee, some abroad managing thru shit agents, some pensioners, some partners in professional services firms

the two good landlords were

- my university halls, and

- a BTR institutional landlord who repaired things within a week (because they had good insurance) and gave me decent contract terms and dealt with me as a consumer

 

Interesting how anti landlord some of rof is. 

clive - not anti landlord - just that my experience has been very negative and the issue is structural

the UK is notable compared to many western/G7 countries in having by far the smallest institutional landlord base for the resi rental market for historical reasons (Thatcher encouraged people to pile into BTL)

the market is fragmented between loads of individual landlords so there are few economies of scale, most BTL landlords have limited capital for investment, and there is limited liquidity in the system (BTL landlords frequently sell to new owner occupiers not to new BTL owners) - these are sadly the facts

 

you have a fundamental misunderstanding of how humans operate (I think you have a doctorate in that subject chill) you would have to impose blanket state control of land/building/rent prices and incompetent or corrupt bureaucrats would skim value out of badly maintained and corruptly allocated housing stock. capital (big money and small pension pots) would look elsewhere for profit. 

How many pensioners really understand shares and trackers 😂

if they can understand their legal and tax obligations as a private landlord they can understand a fvcking ISA.

no-one is born a landlord, being one is a choice. you don't get to complain when society correctly labels you a parasite for it. 

jamie you are obviously in the bottom centile of tenants

happy to be in the bottom centile if that means 

- challenging rent increases with multiple comparables from estate agents/neighbours

- spending thousands of pounds repairing appliances myself due to landlord inaction and not getting any kind of recognition or thanks

- being given a s21 notice multiple times as the landlord needs to sell

- wanting leaks and plumbing problems to be fixed within, say, 6-8 weeks

- challenging deductions on inflated or false claims of disrepair 

the problem is that in some places eg London supply is so outstripped by demand that the system incentives bad landlord behaviour so ultimately not their fault

 

on the flip side professionally I have previously done work for residential landlords in the BTL market and have worked on some horrendous tenant cases where the tenant has nothing to lose (eg doesn’t care about CCJs or credit ratings)

 

Jamie - your experience would be a large % shitter if your “landlord” was chill’s commissar for domestic dwelling house allocation

sad agree

housing associations are fairly shit

you would have to impose blanket state control of land/building/rent prices

ok sounds good

and incompetent or corrupt bureaucrats would skim value out of badly maintained and corruptly allocated housing stock.

the current housing stock is badly maintained and corruptly allocated, i don’t see why it makes much difference if bureaucrats were doing it 

capital (big money and small pension pots) would look elsewhere for profit

good - housing is a human right, its provision shouldn’t be run for profit

But please do share more anecdotes of the insufferable tenant

how about the arrears and possession claim I worked on as a trainee for a high net worth individual in their capacity as a BTL landlord of a Mayfair flat - he was a solicitor who trashed a flat holding wild parties and then moved out with loads of arrears

I did some research on whether we could report him to the SRA for this as a means of putting pressure on him (alongside court stuff)

pancake - all profit is parasitical prima facie but does the activity also offer benefit. leaving aside society’s labels, is the guy running a corner shop a parasite in your view?

i don’t think bullace appreciates exactly how fvcked the current housing market is in the uk

it isn’t fit for purpose - literally any other solution would be better

💯 because corporates are known for being kind to the customers (tenants in this case) aren’t they and oh so likely to arrange for things to be fixed quickly or understanding about changes to tenancies or issues with payment 

Think you've missed the new breed of corporate landlord who are people like Aviva and John Lewis who are building decent new housing stock purely to rent it because they've decided property development is now too risky.  They are huge companies who can afford to employ their own maintenance staff to deal with stuff quickly rather than Joe Bloggs Limited with a few properties in a corporate wrapper who's competing with everyone else to get hold of a plumber.

Donny I'm repaying over 20 years and pretty consistently my payments have been split about two thirds one third with the big chunk being the repayment.  So with a payment of £1,500 a month that's £1,000 repayment and £500 interest that only goes up to £2,500 a month if you triple the interest.

the market is fragmented between loads of individual landlords so there are few economies of scale, most BTL landlords have limited capital for investment, and there is limited liquidity in the system (BTL landlords frequently sell to new owner occupiers not to new BTL owners) - these are sadly the facts
 

Yeah this is an accurate summation of the problem. And the idea that “pensioners” need to invest in rental property because they “don’t understand” other forms of investment is symptomatic of the UK’s general inability to value genuine productive investment, which is a huge part of the reason we’re sliding into the mire as a nation and society.

What’s hard to understand about an index tracker FFS. Anyone can grasp it in about 2 minutes. The truth is that property investment allows leverage which is not typically available to retail investors, this has provided big returns in the past. Nothing to do with the alleged incomprehensibility of holding equities.

comrade chill - you’d prefer Croydon council, Liverpool council, soviet, Albania, East Germany style provision of social housing?

If it’s not provided for a profit it will be low quality, poorly maintained, corruption and incompetence will creep in. 
private provision can be pretty shitty but with the potential to be improved - state provision drags everything down to the lowest common denominator and the poorest and most vulnerable suffer the most. 

private provision can be pretty shitty but with the potential to be improved - state provision drags everything down to the lowest common denominator and the poorest and most vulnerable suffer the most. 

decades of privatisation of all our national services and this is the lesson bullace has drawn

it isn’t fit for purpose - literally any other solution would be better

You don’t mean literally do you. Croydon council, Liverpool council, soviet, Albania, East Germany.

The truth is that property investment allows leverage which is not typically available to retail investors, this has provided big returns in the past. 

easy munny innit

My friends family own the local chippy and have done for generations. To provide themselves security, diversify their reliance on the shop and give inheritance for the kids, they bought over time 3-4 houses in the local area that they rent out to local families. 

if they are priced out to corp landlords who wins? Are they these parasitic landlords of whom you speak or people trying to make a sustainable living, not rely on the state in their retirement and provide for their family.

Loads of my friends, Ofc priced out by Londoners have lived in their houses over the years and had a good experience. 
 

rinse and repeat this across the local builders etc who’ve done the same for the same reason.

 

Think you've missed the new breed of corporate landlord who are people like Aviva and John Lewis who are building decent new housing stock purely to rent it because they've decided property development is now too risky.  They are huge companies who can afford to employ their own maintenance staff to deal with stuff quickly rather than Joe Bloggs Limited with a few properties in a corporate wrapper who's competing with everyone else to get hold of a plumber.

this 100%
 

L and G and Delancey too

Loads of my friends, Ofc priced out by Londoners have lived in their houses over the years and had a good experience. 
 

OysterBay - I am a landlord now and treat tenants well - doesn’t negate the negative experiences I and others have had as tenants, nor the wider background and dynamic that encourages substandard behaviour 

To provide themselves security, diversify their reliance on the shop and give inheritance for the kids, they bought over time 3-4 houses in the local area that they rent out to local families. 

well their investment was the assets (the houses) which will either appreciate or depreciate over time (they have i’d imagine massively appreciated)

when they want to retire they can sell the houses and live off the profits

but i imagine they don’t want to do that, they want to receive a passive income from their tenants, and keep the assets to pass on to their children

this is not a fair system

it is in fact the definition of generational inequality

also looking internationally the UK btl landlord market is actually much less regulated than many other countries

eg

- no specific btl landlord tax

- no landlord licensing reqs other than HMOs

- no national landlord registry in England and Wales

- no effective fitness for habitation laws

If it’s not provided for a profit it will be low quality, poorly maintained, corruption and incompetence will creep in. 
 

fvcking hell it's hard not to do a BREXITBREXIT all caps response to this

Complicated I know Chill but regulated profit making entities will deliver - failure of regulation is the cause of e.g. water companies problems. very difficult for state utility entities to provide capital for investment (obviously in your communist paradise it wouldn’t be a problem but back in the real world). anyway enough misdirection from housing - where has your proposed approach successfully provided social housing?

in fact they shouldn’t be receiving a second income from them at all while they’re still working - rents should be limited by law to the costs of upkeep and maintenance of the property

again, when they retire they can realise their investment, as that’s where they chose to put their money while working

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