There is something deeply distasteful about Britain's obsession with buy-to-let. It is extremely speculative and crowds out first time buyers.
Still, you would think that banks would have learnt something over the last couple of years about risk, and in particular, about lending to highly over-leveraged individuals. Not so. Insofar as there is any mortgage lending going on, buy-to-let is taking up a large proportion of new loans.
According to the Council of Mortgage Lenders, buy-to-let lending rose by 12% during the three months of summer. That amounted to 26,900 buy-to-let loans advanced, worth £2.8 billion. This was a quarterly rise of 8 percent by volume and 12 percent by value. It is the second consecutive quarterly increase in lending. Compared to the third quarter of last year, the volume of lending was up 14 percent and the value up 33 percent, from 23,700 and £2.1 billion respectively. A startling recovery, don't you think?
At the moment, there are about 1.3 million buy-to-let mortgages out there, which accounts for over 10 percent of all home loans. But it remains a shaky business, top-full of dodgy characters. So why to UK banks continue to pour cash into this shady area of the housing market?
4 comments:
A bit harsh?
To be honest, I can sort of see why banks do it. All things being equal, if you lend to an FTB and he or she loses his or her job, then Big Trouble.
If you lend to BTL landlords and the tenants lose their jobs, well they get chucked out and paying tenants found, or the now jobless tenant gets the DWP (aka you, the taxpayer) to pay the rent. (OK, there's Support For Mortgage Interest as well, but that's not quite as generous as HB)
These subsidies to BTL (or mortgage lending) are the worst kind of subsidy (being the direct opposite of Land Value Tax, which is the best kind of tax).
WHY?
Its the governments policy to promote high house prices.
They want ulta low interest rates to push savers money into assets, particularly housing, inorder to save the banks.
Housir prices wouldn't have 'recovered' if not for the ultra low interest rates.
We'll see how long they last.
I personally think the crisis is far from over, and that this country is continuing to pretend its wealther than it is by inflating another bubble.
Rents could increase by up to 80% of the market rate and the Federation calculates that thousands of low-income families could end up having to pay £9,000 extra a year in social housing rents.
By the way, if you think it's time to have your own place, why not try this great option of Rent to Buy Homes in Nottingham. It's the best option you have these days. Good luck in everything!
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