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    #61
    Loanarranger, when you refer to the EEC is this in ironic fashion?

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      #62
      No the Basel 3 like its previous versions is applicable to all lending institutions within the European Economic Community.

      Given that Home Ownership is far stronger in the UK than anywhere else in the community and that BtL is not technically currently regarded as full commercial lending unlike in the EEC where anything outside of home ownership is classified as commercial the Basel 3 sets up the framework of tiers of capital reserves against the different form of lending , therefore for relatively low loan to values carry the bottom tier of capital adequacy and easy to cover with the capital structures of banks and building societies but this becomes more challenging as the loan to value increases and the perceived higher risk of default attached.

      It is for this reason why the UK banks and building societies are more affected than their counterparts in Europe and why there is now a 2 pronged attack by the Basel 3 rules and the expectations driven by the BoE for lenders to adopt a more prudent approach to lending not only for residential homeowner loans but the elephant in the room in the guise of Buy to Let.

      Apologies for the extended response but there needs to be an understanding that irrespective of the requirements of the BoE , the EEC is implementing a range of rules to ensure that there is no repeat of any bank falling due to making loans too readily available.

      Comment


        #63
        I know Wikipecia isn't always correct. Still..

        "The European Economic Community (EEC) was a regional organisation which aimed to bring about economic integration among its member states. It was created by the Treaty of Rome of 1957.[1] Upon the formation of the European Union (EU) in 1993, the EEC was incorporated and renamed as the European Community (EC). In 2009 the EC's institutions were absorbed into the EU's wider framework and the community ceased to exist."

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          #64
          Wow and there I was thinking that they were just a bunch of interfering beurocrats. Thanks for the clarification.

          Comment


            #65
            Did you mean the EEA?

            https://en.wikipedia.org/wiki/European_Economic_Area

            Comment


              #66
              CML: stamp duty rise triggers 60,000 extra transactions

              The CML says that the distortion caused by the new stamp duty rate "appears to have been larger than anything we've seen before that's associated with a tax change".

              Its analysis of new Bank of England and HM Revenue and Customs data shows that on a non-seasonally adjusted basis, property transactions reached 162,000 in March.

              The CML would normally have expected this figure to have been just over 100,000, which implies a large chunk of the increase in transactions was down to the stamp duty change.

              A 60,000 increase in property transactions compared to the baseline was "larger than expected", which the CML has attributed largely to a marked increase in cash transactions.

              Cash-funded transactions increased by nearly as much as mortgage transactions, even though cash has on average only accounted for 35% of the market.

              The CML's current best estimate is that an extra 32,000 mortgaged transactions took place in March, which means that cash transactions rose by 28,000.

              Of the four categories, the largest proportionate increase was in buy-to-let house purchases, which increased by more than 180% from February. The next biggest increase was in cash transactions, which rose by more than 80%. Transactions by movers increased 60% and first-time buyer purchases increased by 28% compared to February.

              Therefore buy-to-let still only made up only a third of the 60,000 increase in total property transactions.

              CML analyst Mohammad Jamei said:

              "Alongside the growth in transactions, there was a corresponding jump in lending. Our initial estimate was of extra lending of between £4 and £5 billion, with the data from the Bank of England showing the actual figure was at the higher end of this figure.

              "We’ve now revised our initial estimate of lending in March to £26.2 billion, which was 46% higher than February. This implies just over £5 billion extra lending than would otherwise have been the case, which roughly tallies with the 32,000 or so extra mortgaged transactions, given an average loan of about £150,000 per mortgaged transaction.

              "Our understanding is that approved applications that were in the pipeline were squeezed to complete before the stamp duty deadline, as opposed to seeing a big increase in new applications being approved in March. As a result, it is very likely that we will see lower activity levels in the next few months, which ties in with early data we have collected for April, showing a marked drop-off in lending."

              Comment


                #67
                I assume that now very few BTL's will be bought by individuals and the few mortgage providers who are prepared to lend to Ltd companies (Whether SPVs or Trading companies) will be joined by all the other lenders who suddenly see demand of "traditional BTL mortgages" fall off to next to zero.

                Comment


                  #68
                  Regrettably it isn't that simple, under the requirements of the Basel 3 rules , such loans require greater capital sums to protect the basic funding and for some lenders this might not be possible and the only way that they might continue to fund such lending is as I have previously mentioned is the restrict the percentage LtV plus charge a higher premium for such lending.

                  I had the opportunity of meeting a senior executive of a Buy to Let lender who mentioned that they along with another significantly well established lender in this niche sector were seeking a more realistic approach to the question of rental stress calculations taking account of the tax changes which will kick in over the next 4 years taking full account of the actual tax position of applicants both now and by the time the full changes take effect in order not to disadvantage borrowers who will remain to any significant level as standard tax payers. This as a broker comes as a refreshing approach to lending in the BtL sector for individuals who do not want to go to the expense of going down the corporate route particularly as some have , for understandable reasons elected to make the rental calculations assessment that much stricter.
                  It is evident that all lenders are in a state of flux following the recent changes and new mortgage applications have shrunk considerably but I believe that there will be a light at the end of the tunnel albeit the days of cheap and easily available BtL funding will become a thing of the past by September.
                  I will of course post any updates on the forum.

                  Comment


                    #69
                    Rental market predicted to be flooded

                    Here is an article lifted from the BBC which if true in its predictions will amuse lenders to reassess their rental stress calculations as an act of safety.

                    " Landlords who scrambled to buy homes earlier this year are beginning to rent them out, providing tenants with a flood of properties, research suggests.
                    A record number of sales took place in March, as buyers tried to beat last month's Stamp Duty deadline.
                    That has resulted in an 11.5% rise in rental properties being listed in April, according to data from the website Rightmove.
                    Some towns, like Worcester, have seen rental listings surge by nearly 50% .
                    Even in London, the number of homes for rent rose by 9.1% last month, says the research conducted by investment firm Property Partner.
                    It looked at 90 towns and cities across the UK, and found that the supply of properties went up in 82% of them.
                    Where rental properties are coming onto the market
                    Town Region % increase in listings (April v March 2016)
                    Worcester West Midlands 48.9%
                    Chelmsford East 38%
                    Stevenage South East 36.4%
                    Southport North West 34.4%
                    Telford West Midlands 32.3%
                    Cheltenham South West 30.3%
                    Watford East 29.4%
                    Bath South West 29.3%
                    Newport Wales 27%
                    Woking South East 26.8%
                    source: Property Partner
                    However many landlords may take some time to renovate their newly-acquired houses, before offering them for rent.
                    "Some landlords might want to do up their properties - such as getting the painters in, or installing a new kitchen - so there may be a delay," said Richard Donnell from the property website Hometrack.
                    "However, over the next one or two months, a reasonable slug of these properties will come on the market."
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                    Lower rents
                    In theory, increased supply should mean a fall in the cost of renting.
                    But according to the Reed Rains buy-to-let index, rents have been falling in any case since September 2015.
                    At that time, rents in England and Wales hit an average of £816 a month. By April 2016 they had fallen to £791 a month.
                    But Adrian Gill, a director of Reed Rains and Your Move, believes they will not fall much further.
                    "Tenants still need homes and demand is still soaring," he told the BBC.
                    "So actually later this year the balance of supply and demand might shift even further in favour of landlords. A short-term spurt of supply won't shift the fundamentals."
                    Dan Gandesha, the chief executive of Property Partner, said the supply of rental properties was unlikely to continue rising.

                    Comment


                      #70
                      Middle-class 'buy-to-let dream' is over - as mortgage lenders to demand 40pc deposits

                      An article has been included in the Telegraph and whilst I do not subscribe completely to the doomsday scenario it does highlight the problems which lie ahead and what I have been cautioning about in recent weeks.

                      Would welcome views on this article

                      © Provided by The Telegraph Investing in buy-to-let property is on the verge of becoming unaffordable for middle-class savers as stricter lending rules mean they will soon need at least a 40pc deposit to qualify for a mortgage, Telegraph analysis reveals.

                      New, tighter lending criteria set to be enforced as early as this autumn by the Bank of England will lock large groups of savers out Britain's rental market, and limit it to an elite club of wealthy investors only.

                      Under the new system borrowers are likely to have to find nearly twice as much money for a down payment on a property than at present, as around half of buy-to-let mortgages sold today only require a 25pc deposit, according to figures from a leading broker.

                      Until recently middle-class savers have helped fuel a buy-to-let boom in Britain with thousands funneling their life savings into buy-to-let to help fund their retirement.

                      But now it appears buy-to-let may have had its heyday as The Bank is forcing lenders to "toughen up" over concerns they have relaxed standards for landlords, creating the conditions for a disastrous property crash.

                      Most lenders' "stress tests", which tell if someone can afford a mortgage, currently assume borrowers pay interest at 5pc, and that their rental income will be 25pc higher than their mortgage.

                      Based on these criteria and the figures for the average UK home worth £202,436, and tenants paying the average UK rent at £764 a month, the average the minimum deposit typically required to obtain a buy-to-let mortgage is £55,741 (27.5pc).

                      But in March The Bank of England recommended that interest assumptions should rise to at least 5.5pc, and this will be confirmed later this year after a formal consultation.

                      Some lenders are already getting stricter following the Bank's warnings, for example this week Nationwide, one of Britain's biggest lenders, requires borrowers to earn rental income which is 45pc higher than their mortgage, up from the usual 25pc.

                      Other lenders will follow suit in a "domino effect", brokers said last week.

                      Calculations done for the Telegraph by John Charcol, reveal to to qualify for one of Nationwide's new deals, a landlord buying the average UK home with a mortgage needs a £83,349 (41.2pc) deposit.

                      This is based on an interest-only deal requiring a £75,728 (37.4pc) deposit, plus £7,621 (3.8pc) stamp duty.

                      New buy-to-let rules coming in to action

                      And if the change proposed by the Bank of England goes ahead, Nationwide would have to tighten its rules even further, as it would raise the interest rate it uses in its stress tests from 4.99pc to at least 5.5pc. This could increase the deposit required to obtain a mortgage by 5.8pc to £95,144, or 47pc of the purchase price.

                      The calculations show the effect of the changes will be even more extreme in more expensive areas where rental yields tend to be lower, with London and the South East on track to move well out of reach for most amateur landlords.

                      Based on an average London property on the market at £500,000 and tenants paying the average London rent of £1,540 a month, a landlord would need a £255,407 (54pc) deposit to qualify for a Nationwide mortgage. This is based on an interest only mortgage requiring a £244,593 deposit (48.9pc), plus £30,000 for stamp duty.

                      The move is just the latest in a string of measures designed to cool the buy-to-let market, as changes introduced last month mean any buy-to-let property worth more than £40,000 now attracts an additional 3pc stamp duty charge. The Government is also reducing tax relief on buy-to-let mortgage interest payments from April 2017, a move which will hurt borrowers with big mortgages. Experts said it was also a major driver behind lenders becoming more cautious.

                      Ray Boulger, senior technical manager at John Charcol, who conducted the analysis, said the move would be a "huge" blow to middle-class landlords looking to buy or remortgage in order to raise equity to expand their property portfolio. He said: "This will be gutting for people who can't afford to remortgage

                      Comment


                        #71
                        Lenders prepared to accept remortgage applications immediately after Initial Purchase

                        I thought I would update information governing the remortgage of property immediately after purchase given that a number of individuals acquired property pre April 1 by using either personal cash resources or short term property finance in order to avoid the 3% additional SDLT.

                        Current there are at least 9 lenders who will consider "Day1" remortgage applications, however it is important to note that such loans will be based against the original purchase price and not immediately designed to enable the release of an EquityProfit that may have been acquired in the purchase; having said that if a property was acquired and substantial ( Not cosmetic) works undertaken for which appropriate invoices can be provided there may be opportunities in a minority of such lenders to consider a release of enhance capital value , the remains lenders might however require the property to have been owned for at least six months. The lenders in question are:-
                        Aldermore
                        Axis Bank
                        Fleet Mortgages
                        Foundation Home Loans
                        Kent Reliance
                        Keystone Property Finance
                        Mortgage Trust/ Paragon Mortgages
                        Shawbrook
                        Virgin Money

                        Hope the above helps forum members who either are seeking such types of refinance or contemplating buying at auction.

                        Comment


                          #72
                          I am posting an article which has appeared in a Mortgage Broking Trade Magazine today the contents of which confirms the initial concerns following the SDLT and the proposed changes in the tax regime for BtL.


                          BoE: mortgage lending sees £7bn monthly drop
                          By Rozi Jones 1st June 2016
                          Mortgages
                          BoE: mortgage lending sees £7bn monthly drop
                          As this was no surprise, especially given the extra lending on buy-to-let in March, our focus must now turn to the future of the market.
                          Mortgage lending increased by £0.3 billion in April - a sharp drop from the £7.4 billion increase seen in March and the lowest figure seen since August 2012.

                          The latest Bank of England Money and Credit report shows that gross lending secured on dwellings fell from £27.4 billion in March to £19.2 billion.

                          Total lending to individuals increased by £1.6 billion in April, compared to £9.3 billion in March and a six month average of £5.7 billion. This is the lowest figure seen since May 2013.

                          More : BoE: lending increases by £9.3bn in March
                          However mortgage approvals remained more stable - reaching 66,250 in April, a slight drop from 71,357 last month and a 71,075 average.

                          The number of approvals for remortgaging was 40,510, broadly in line with the average over the previous six months

                          Comment


                            #73
                            Metro Bank Improves Criteria

                            In common with other lenders in increasing the level of mortgage business, they have this morning made the following criteria changes:-
                            1) Rental Income Stress Calculation 125%@ 5.5%
                            2) Metro will allow borrowings with to a maximum of 10 properties and an overall exposure of 15
                            3)In the event of a shortfall on the rental stress calculation they will consider "Top Slicing" from earned income to support the loan requirement.

                            I am not endorsing Metro Bank in any capacity other than to highlight changes which certain lenders believe will aid the increase in new BtL business.

                            Comment


                              #74
                              Lenders withdrawing Buy to Let Mortgage Products in a hurry

                              Today has seen a number of main stream lenders giving notice of immediate withdrawal of Buy to Let mortgage products along with a couple on the residential HomeLoan front.

                              I am not sure if this is a knee jerk reaction to the significant changes in money market rates going forward for the next three to six months but clearly the overnight decision by the electorate has cast hopefully a temporary cloud over funding of buy to let investments and these include corporate borrowings.

                              As an adjunct to the above I have had telephone calls from agents asking if I am still in the market for buying property to which I have replied not for the present and only when market sentiment has calmed , surprisingly the canvassers indicated that this was a sentiment being expressed by many of the investors they are contacting.

                              Time for the G&T to calm the furrowed brow.

                              Comment


                                #75
                                Lenders increase rental stress calculations

                                Today TSB has joined with Newcastle BS and Foundation Homeloans in announcing an increase in the rental stress calculation from 125% to 145% against either a notional rate or the SVR .

                                Having spent an age playing around with the new formulae it is clear that applicants are going to find that the amount to be borrowed could be way below that which was expected.

                                I will keep you posted on subsequent changes.

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