Prospects for Property Investors After Bank of England Clampdown on Buy to Lets

Some recent changes are already hitting landlords hard, others will soon. Here we look at the available options in what for many buy to let investors are troubling times.

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Stress for some as Barclays applies buy to let mortgage rate change

With the recent industry congratulations on the success of buy to let mortgages, it is not surprising that Barclays has announced to change its buy to let mortgages against a higher rate of 5.79% albeit just to stress test.

A spokesperson from the bank commented they are introducing a new single affordability rate (which will come into effect on Monday 19 May) for all buy-to-let transactions to “ensure consistency across all products”.

The reasoning behind the decision is apparently to ensure customers can afford their mortgage payments and to withstand whatever may happen with the interest rates in the future.

Of course, investors with The House Crowd needn’t worry about stresses such as these that the banks bring on for landlords and property investors. With our unique crowdfunding model, we make investing in property simple – no banks, no mortgages; the smarter way to invest in property. So why not join our investors and avoid the stresses that banks cause!

The full article can be found here.

The Misery That Banks Cause

Following on from the reports in the press last week about Chris and Denise Tudor-Whelan, I have coincidentally met five separate people recently who have been ruined by the banks for no good reason.

These people once had very successful solid property businesses – all of them worth tens of millions and all of them keeping up payments on the loans they had secured against the properties.  And yet these people were all destroyed by the small print in their loan documents; three of them being made bankrupt and two still fighting to avoid it.

What most people do not know is that the small print in their mortgage documents allows the banks to call in the loans if the borrower breaches the “Loan To Value Covenants”.

Essentially, what this means is the banks can have your property portfolio valued periodically by a surveyor (of their choosing) and if that surveyor decides the value has dropped below a certain threshold the bank can call in the loan immediately or massively increase the interest rate because of the perceived extra risk, thus making the investment unsustainable. They are allowed to do this even if you have never missed a payment.

There is little doubt in my mind, after speaking with these people that some if not all the banks have actively pursued a policy of using this small print to destroy property investment businesses and seize their assets at a vastly reduced level.

Yes it’s immoral, unethical and corrupt, but what can be done about it? There is certainly a groundswell of public opinion against the bankers. And the internet abounds with the self proclaimed “free men movement” seeking to remove themselves from the shackles of HMRC and the “banksters”. They have some interesting arguments and I would love for them to be successful. Unfortunately the whole system is stacked against them so it is incredibly unlikely.

To my mind the best solution is to avoid using banks wherever you can. Give them as little power over your life as possible. Its why we set up The House Crowd so you have the choice of dealing with an ethical, transparent and fair organisation that will also give you a much better return on your money.

Read more about the Tudor Whelan’s story

Read more about the how the banks operate illegally and cheat people out of their homes

Read Cartmel Butlers Report to the Parliamentary Select Committee on how banks sell on the benefit of your mortgages to privately owned offshore companies but then seek to reclaim the debt from you and repossess your property (even though you no longer owe them the money).

 

The difficulties of taking that 1st step onto the UK housing ladder

Regardless of the struggles prospective homeowners are currently facing to secure a mortgage and find the right property at the right value, it is safe to say that most British households, as has long been the case, aspire to own their own home. However, the financial woes of the past few years have, understandably, created a more risk-averse public, which is something the current Government is now looking to address.

The Government is rolling-out a range of measures through equity finance instruments that limit risk, improve affordability and fund home buying, with the aim of boosting first time buyer confidence. Schemes like First Buy, which provides affordable new build housing to first-time buyers with a 5% deposit, are intended to share risk amongst the funders and buyer, as well as being of little or no burden to the public purse.

Another market-based product with comparable supposed benefits is a new partnership based mortgage aimed at middle-income households able to stump up a 20% deposit. This product involves an equity stake injection to lessen the risk of negative equity and, trusting that price increases remain limited, should reduce mortgage payments below those of a traditional mortgage scheme.

Clearly, some steps are being taken by those in power to address buyer-reluctance and stabilise the market. However, it is yet to be seen whether the relatively small number of incentives being introduced can achieve the right blend of risk, price, debt and target consumers to spark the intended revival of buyer confidence.

At The House Crowd we offer a solution for buyers struggling to raise a deposit for their ideal home. For as little as £1,000, our crowdfunding property investment model provides a minimum annual return of 6%, in addition to a share of house sale profits – ideal for growing your deposit.

The House Crowd is a brand new concept in property investment which allows people to invest small amounts via crowdfunding (for more information on the process, visit www.http://thehousecrowd.com/thehousecrowd//how-it-works/). We are committed to breathing life into empty, rundown properties whilst giving investors great returns on their investments (for more information about us, visit www.http://thehousecrowd.com/thehousecrowd//about/our-manifesto/). If you’ve read enough and want to invest now, visit www.http://thehousecrowd.com/thehousecrowd//invest-in-property/).

Could a supermarket become a supermortgage provider?

Have we just seen another example of the nation’s disillusionment with big banks with the launch of leading supermarket, Tesco’s, own variety of mortgages? We think so, and we also think it represents a growing rebellion against those banks by large and small institutions, as well as the private individual.

A couple of weeks ago we talked about the launch of the Bank of Dave, and how disillusionment with high street banking can breed entrepreneurialism and innovation. And at the other end of the scale, this move could represent a similar frustration, this time by one of the world’s largest organisations which has spotted a large gap in a somewhat under crowded and under delivering market.

While Tesco’s selection of mortgages and rates are neither market leading or particularly newsworthy, they do offer those of us who are disenchanted with the high street banks, an alternative. However, while we’re sure this will give the sector a much needed shake up, it’ll take a lot to convince us that this is not just another ‘big bank’ clone vying for a share of an already frustrated market.

We will of course be keeping a keen eye on Tesco’s progress, and whether it can convert its success in the fast moving consumer goods market to a success in the housing market.

The House Crowd is a brand new concept in property investment which allows people to invest small amounts via crowdfunding (for more information on the process, visit www.http://thehousecrowd.com/thehousecrowd//how-it-works/). We are committed to breathing life into empty, rundown properties whilst giving investors great returns on their investments (for more information about us, visit www.http://thehousecrowd.com/thehousecrowd//about/our-manifesto/). If you’ve read enough and want to invest now, visit www.http://thehousecrowd.com/thehousecrowd//invest-in-property/).

Can you blame people for thinking differently?

Moneyfacts reveals that there has been a considerable fall in buy-to-let property investment mortgages, the number of products now available is less than a fifth of those on offer five years ago. There are now 411 prime product buy-to-let deals compared with 459 a year ago and a staggering 2,265 five years ago. The average variable rate on a buy-to-let mortgage, today is 4.53%, compared with 6.23% five years ago, while the average fixed rate of 5.03% today compares with 6.03% five years ago.

Rachel Springall, spokesperson for Business Moneyfacts, said: “As interest rates have fallen for buy-to-let deals, product availability and therefore choice have also dropped a staggering 82% in five years.” She said that competition today is “focused around the price of a few products rather than a wide selection of products, which allow for other considerations such as service and additional benefits”. With such a reduction in selection of products to help property investors, obviously restricting the access to property as a form of investment, do you blame people for looking for alternatives? We at The House Crowd offer a solution to this problem negating all those hurdles faced by investors – our crowdfunding method of property investment offers a process where all participants have a  share in the profits -  with traditional methods of investing no longer working, why not join us in thinking differently!

The House Crowd is a brand new concept in property investment which allows people to invest small amounts via crowdfunding (for more information on the process, visit http://thehousecrowd.com/thehousecrowd/how-it-works/). We are committed to breathing life into empty, rundown properties whilst giving investors great returns on their investments (for more information about us, visit http://thehousecrowd.com/thehousecrowd/about/our-manifesto/). If you’ve read enough and want to invest now, visit http://thehousecrowd.com/thehousecrowd/invest-in-property/).