UK’s senior bankers are responsible for the credit crunch & should walk says Lawrenson of Letting Focus

Two blogs today - both of them bashing the banks!
As an Alliance & Leicester shareholder nursing a loss on my tiny investment there, what got me really riled last week was to see that all the most senior executives at that bank will get to keep their jobs following the Santander takeover and get enhanced pay to boot – which must be very nice for them!
This is "situation normal", because in the cosy world at the top of the banking business not one senior UK banker has been fired for their disastrous decisions to buy the toxic debt that has crippled their banks and increased the cost of credit for anyone taking out a loan or mortgage.
Meanwhile, everyone else has to suffer and many people outside the banks cosy top management tier are losing their jobs as a direct result of the financial industry’s failures.
Back in the bad old days of the 70s when the unions supposedly ran the country, the likes of Red Robbo, Degsy Hatton et al became figures of public hate in some of the newspapers.
And today?
Well, the silence from the press is positively deafening. I have seen no articles in the nationals calling for the bosses at the top of banking to do the walk of shame to spend the rest of their days at the golf course. It is truly amazing.
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ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of property investment expert lettingfocus.com.
I’m the author of “Successful Property Letting - How to Make Money in Buy to Let” which for the last 2 years has been the UK’s top selling property title - buy the UK's top selling landlord book.
It is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on buying property below market value.
I’m an expert property journalist, property speaker and a well known landlord blogger
I contribute to newspapers and a host of property websites, write a number of columns in the press and I can provide landlords coaching
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services and am a regular speaker at property shows.
You can read more of my blog & find details of my networking, advice, property mentor programme at my website.What’s unique about lettingfocus.com is that we offer you help as an independent property investors coach because unlike most people in the buy to let and property “advice” business we are not linked to a property company, a developer, an agent or bridging loan financier and do not receive commissions from any of these sources.If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Copyright: David Lawrenson 2008. This blog is updated once a week.
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The credit crunch means it is time to make offers in the UK property market says Lawrenson of Letting Focus

Ah, the credit crunch continues to spook the market!
The number of house buyers on estate agents’ books dropped from an average of 276 registered per agent in January to 243 in February 2008, the lowest recorded since the survey started. And the difference between asking and sales price has risen again this month – to 4.5%.
Today, if you want to buy a property either for yourself or to let out and you have not got a decent deposit to put down or you have a bad credit record things will be looking a bit bleak for you.
In fact, things have become quite a bit tighter for everyone.
Just 2 weeks ago Lloyds TSB, their C&G subsidiary and the Royal Bank of Scotland (RBS) reduced their maximum loan to value back down to 90%.
And Alliance & Leicester and the Britannia have pulled their 95% loan to value mortgages. These moves follow hard on the heels of the Halifax who have just raised their interest rates again.
Lenders are “pulling” mortgage offers suddenly and without warning proving how hard it is for them to get funds.
So, it seems the days of cheap money have disappeared for a while and we can see the back of six times income multiples at least for a year or two.
Does it matter –well, yes.
The problem is made worse because about 150,000 people in 2007 borrowed over 90% of their property’s value. So, this clampdown on loan to value really does have the potential to reduce demand for houses and could hit prices harder than we have seen so far.
Naturally, the best deals in the standard residential market are available to those borrowers who have to borrow the least. Nationwide has said its best mortgage rates would now only be available for borrowers who put in at least 25% of a property’s value!
So far, we have only seen a gentle tailing off in house prices. The Nationwide said that February marked the fourth month in a row of house price falls with annual growth down to just under 3% annually.
Mortgage approvals are also low - at 75,000 for January - which is the second lowest figure for 12 years.
Also, a lot of people - most estimates put it at 1.2 million - are coming off fixed and discounted deals taken out two to three years ago and are facing big increases in their mortgage rates this year.
Sounds bad?
Well, yes it does, but so far, whilst repossessions are going up, they are still only at about one third of their 1991 peak and less than they were at any time in the 1990s.
But it is possible that things will get worse and property values could fall more sharply. We will see!
It has also got tougher for buy to let borrowers. Moneyfacts.co.uk recently calculated that UK landlords need to find about £5,500 more of their own money to buy the average buy to let property than they would have had to one year ago.

BUY TO LET LOANS
Also, buy to let borrowers will now have to find at least 15% of the property value -the days of 10% have long since gone.
Woolwich, never the most gung ho of lenders, has just cut the amount it will lend landlords to 75% LTV.
Most other lenders are also now demanding 125% or 130% rental over interest and many brokers I spoke to think that this will soon be the norm (again)
A survey by Savills said that about a quarter of landlords would be unable to make further purchases because of this tightening in credit criteria.
But despite all this, recent Council of Mortgage lenders showed buy to let lending continuing to grow fast, no doubt chasing the increasing rental returns caused by so many would be homebuyers becoming tenants.
And what do I think?
Well, I viewed some properties during the Easter weekend and have put in one offer.
So, I’m not scared.
I figure that whatever happens over the next few months, we will still have a shortage of the right kind of housing.
The fact is that we simply don’t know what further bad credit crunch news awaits us.
And we may not know fort a long time yet.
So, sod it, I’m jumping back in and making offers.
If you need more advice on investment property or buy to let investments in general please ask me.
I’m David Lawrenson from property investment mentors http://www.lettingfocus.com/
I’m the author of the buy to let book “Successful Property Letting - How to Make Money in Buy to Let” the UK’s top selling property title.
Buy the new edition here: http://www.amazon.co.uk/Successful-Property-Letting-Right-Plus/dp/0716030195/ref=sr_1_1?ie=UTF8&s=books&qid=1203933977&sr=1-1
It is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on buying below market value. I’m an expert on the UK property market and a well known property investment blogger and I contribute to newspapers and a host of property websites, write a property investment blog, a number of columns in the press and run a landlords advice service.
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services.You can read more of my property investment blog and details of my networking, advice, buy to let networking programme at my website http://www.lettingfocus.com/My next London property investors networking meeting is coming soon. Click here for details: Property Investment Advice
What’s unique about lettingfocus.com is that we offer independent property mentoring because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.Copyright: David Lawrenson 2008. This blog is updated once a week. Permission must be sought before using the material in the blog.

Paragon may stop lending to new borrowers because of credit squeeze says Letting Focus

Buy to let mortgage specialist Paragon has said it may have to stop lending to new borrowers because of the credit squeeze. Paragon raises all its cash on the money markets not from savers and so it has been caught out by the crunch.
It has taken some products off the market and increased the prices on others.
As Paragon has no savers it cannot turn to Mr. Darling for help and has indicated it may raise money via a rights issue – issuing new shares to raise cash.
If this does not happen there will be doubts about its future – just as there were in its previous incarnation as National Home Loans back in the late 1980s – when it was last bailed out.

New Mortgage Rates
However, existing buy to let investors with loans from Paragon should not be under threat - though they may find Paragon’s new rates not to their liking when they need to re-mortgage.
Paragon is one of the largest lenders in the residential property investment sector, funding one in every ten buy-to-let loans. In general, it has tended to avoid new build flats, so it’s lending book may be attractive to bidders.
All this news is grist to the mill of newspapers that have long (very long) predicted the demise of buy to let. They are fond of saying that the falling number of buy to let loans and their rising cost could force some investors to sell.
And they reported with glee that no less an august institution than the Royal Institution of Chartered Surveyors has predicted that buy to let is set to become the preserve of the wealthy.

Preserve of the Wealthy
RICS has recently released figures suggesting that to purchase a buy-to-let property you now requiore a deposit of about £65,000 – effectively 30 per cent of the property’s value. They say five years ago, the required deposit was £10,000, or 8 per cent of the value of an average-priced property in the UK.
But whilst in theory borrowers needed to stump up only 8 per cent of the property value, the lending criteria in 2002 were much tighter, especially the rent to interest ratio which meant that lenders actually required investors to put down a deposit more like 15 or 20%.
So, I don’t share the pessimism

Buy in the Right Area
Buy in the right area and the right kind of property and you should do well - even if property prices do take a tumble over the next 18 months or so.
And as defaults in buy to let are still lower than the rest of the mortgage market, I don’t expect lack of credit will be a problem for long.
And despite what RICS says, there are still plenty of properties on the market, even for new-build flats, for which a 20 per cent deposit is (for now at least) perfectly satisfactory for most lender.

ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
We are LettingFocus.com - the property investing experts and I’m David Lawrenson, the author of “Successful Property Letting” - the UK’s top selling property book for the last 3 years.
What’s unique about LettingFocus is that I offer independent unbiased
property newtowrk seminars covering property investment and letting because unlike most people in the buy to let and property “advice” business I am not linked to a property company, developer, agent or bridging loan financier.
I can tell you where to buy (which areas), what type of property to buy, when to buy, how to buy it at a low price, how to make sure you get tenants who are going to stay & pay the rent and how to manage it.
I have been a landlord and property investor myself for over 25 years.

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BMV Property Bargains Among the Panic (It Will Help If You Have a Good Credit Rating and Lots of Cash!)

Once the BOE had to step in to help Northern Rock, there was always going to be more than a whiff of panic in the financial system
At least with retail price inflation coming down the BOE could hold the base rate at 5.75%.
But now, the whole world seems spooked because along with expected mortgage rate rises, the stock market has been hit hard – especially the banks and in particular the lenders reliant on the money markets to raise money for mortgage finance. Stand up Paragon and B&B - who also all have a a fair bit of buy to let lending
What a change from earlier in the year!
Only yesterday, lenders had been busy relaxing their lending criteria with borrowers for non buy to let mortgages getting higher multiples of earnings, higher loan to value ratios and landlord borrrowers getting softer rent to interest calculations.

Lax Lending regime Over
Now, it looks like this laxer lending regime has ended – at least as long as the credit crunch lasts
The crunch has also come at a really awful time, because back in late 2005, according to the Council for Mortgage Lenders (CML), over a half milion people took out fixed-rate mortgages, mostly for two years, at an average interest rate of just over 4.5 per cent.
Since then the Bank of England has raised base rates five times. If you add the effect of rises in rates due to the currrent crunch onto all that and you can see how people may really suffer over the next month or two.
Are there any silver linings for property investors and home buyers?
Yes. This will all mean that there could be a lot of “distressed property sellers” out there over the Autumn.
So perhaps this is an opportunity for people to buy property cheaply and more people will decide to return to renting or put off buying a house – thus pushing up rents.
The only trouble is, mortgage finance will be hard to come by, so those with a cash pile to invest and snap up property will do well, while those with none and / or with blemished credit records will be ruing their highly leveraged or bad credit position.

LETTINGFOCUS.COM
We are LettingFocus.com - the property lettings expert and I’m David Lawrenson, the author of “Successful Property Letting” - the UK’s top selling property and buy to let book for the last 3 years.
As a landlord and property investor myself for over 25 years we can offer independent unbiased
seminars for buy to let investors and landlords as well as one to one advice covering all aspects of being a landlord and investing in property.
Property “advice” is unregulated but as I am not linked to a property company, developer, estate agency or bridging loan provider I am one of the few who can offer unbiased independent advice on where to buy (which areas), what type of property to buy, when to buy and how to buy property at a low price. I can also explain how to reduce the risk of getting a bad tenant.

CHECK OUT THESE PAGES AT OUR SITE LETTINGFOCUS.COM:
Our Events only take place twice a year.
For our NEXT SEMINAR AND NETWORKING EVENT for Landlords and Property Investors click here:
Next Property Investing Seminar and Networking Event
We have GREAT OFFERS for landlords too, Click here: Services and Products for Landlords to see our Landlords Resources (Useful Links) page. (Selling services to landlords and property investors and have a national coverage? You could be a partner, please get in touch!)
For general info on our SEMINARS AND CONSULTING click here: Property Seminars, Networking Evenings and Consulting
ONE TO ONE CONSULTING click here: Property Consulting
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Sub Prime Crisis: Shop Around for the Best Mortgage Rate But Be Prepared to Pay More If You Need To Re-Mortgage says Letting Focus

For quite a while now we have known that all was not quite right across the pond in the US mortgage market.
Over zealous brokers and lenders have been recklessly advancing heavily discounted mortgages to people on low incomes and no assets.
These loans are known in the market as “sub-prime”.
Once the loans came to the end of their discounted period, many of the borrowers - who it is fair to say, were not among the most financially astute – couldn’t meet their new higher repayments and the lenders who advanced the loans look very shaky.
And it now appears that much of this lousy debt business has been repackaged and sold on as what’s called securitised debt and bought by lots of other financial institutions – cue big falls in the share prices of the banks on this side of the water and around the globe.
Unfortunately, even mainstream interest rates could be set to go up as the credit squeeze really starts to hit. This is because, as a result of the credit crunch, the banks have increased the cost of lending among themselves to the highest rate for nearly nine years. (You can see this from the 3 month LIBOR rate (The London Inter Bank Offer Rate - which is the rate at which banks lend among themselves.))
This now stands at 6.74%, almost 1% above the Bank of England Base rate.

Mortgage Lenders
Mortgage lenders with no branches and hence access to retail savings will likely be the most affected in the short term and the most likely to hike rates – indeed some alreay have.
Lenders who use funds from their own balance sheets rather than securitise their loans and sell them into the wholesale market will offer the better deals.
The message is - shop around for the best mortgage rate - and if you have ever missed a loan or card repayment before expect to pay more for your mortgage too because lenders will be tightening up their criteria now.

ABOUT US
We are LettingFocus.com and I’m David Lawrenson, the author of “Successful Property Letting” - the UK’s top selling property and buy to let book for the last 3 years.
I have been a landlord and property investor myself for over 25 years.
At LettingFocus we offer independent unbiased information for buy to let investors and landlords as well as one to one advice covering all aspects of being a landlord and investing in property.
In a market place full of poor advice, unlike many in the still largely unregulated buy to let and property “advice” business I am not linked to a property company, developer, estate agency or bridging loan provider.
As such I am able to give unbiased independent advice on where to buy (which areas), what type of property to buy, when to buy and how to buy property at a low price. I can also explain how to reduce the risk of getting a bad tenant.

OTHER PAGES AT OUR SITE LETTINGFOCUS.COM:
For our NEXT SEMINAR AND NETWORKING EVENT for Landlords and Property Investors click here: Landlords Seminar and Networking Event
We have GREAT OFFERS for landlords too, Click here: Services and Products for Landlords to see our Landlords Resources (Useful Links) page. (Selling services to landlords and property investors and have a national coverage? You could be a partner, please get in touch!)
For general info on our SEMINARS AND CONSULTING click here: Property Seminars, Networking Evenings and Consulting
ONE TO ONE CONSULTING click here: Property Consulting
CLIENT TESTIMONIALS from past customers click here: Testimonials
BUY THE BOOK click here: Buy the Book at Amazon
THE HOME PAGE OF THIS BLOG click here: Blog
THE HOME PAGE OF OUR MAIN SITE click here: LettingFocus Home Page
To JOIN our Free QUARTERLY NEWSLETTER simply send an email to david@LettingFocus.com - Please note we WILL NOT send spam or sell our mailing list to advertisers!

IF YOU HAVE A SITE WHY NOT LINK TO THIS BLOG OR OUR WEBSITE?

TO VIEW RELATED POSTS select a “Category” at the bottom of this page.

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Copyright: David Lawrenson 2007. This blog is updated at once a week
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