Some doom

[centurian]

HSBC said its loan terms generally included a maximum loan-to-value percentage. If these were exceeded “we are likely to require that the position is brought back within covenant” ..

So what will they actually do about it then Re-possess the property and turn a paying mortgage holder into a hard loss.

More likely I bet they will try to apply charges - or try and jack 5% on the interest rate (citing increased risks etc.), which means the BTL holder will either :-

a) Stump up the cash to HSBC - HSBC win

b) Move the mortgage elsewhere - but this will mean finding even more capital as no other provider will touch it - HSBC over the moon as it completely removes a risky loan.

c) Pay whatever charges/extra interest HSBC levy - HSBC make more profit on the loan, which helps offset the risk.


I.e. HSBC win regardless

[BrilloPad]

So more bad news to come in the housing market then. Much more of this and the BTLers will reach a tipping point and offload at any cost rather than face repossession.

[swamp]

Doom for who?

Bank: no doom, business as usual.
Silly bint who is mortgaged to the eyeballs: yes, doom.
Canny buyers who can buy cheap property from dumb BTLers offloading property: no doom, actually boomed.

Title should be 'Some doom, some boom, and some normal stuff'.

[Moscow Mule]

The FT

Lenders target buy-to-let
By Sharlene Goff
Published: April 3 2009 19:10 | Last updated: April 3 2009 23:17
Wealthy borrowers are being given as little as one month’s notice to pay £1m off their mortgages, as banks take ever more dramatic steps to cope with the housing downturn.

Charles McDowell, a prime property consultant in London, told the Financial Times that lenders had asked some of his clients with large buy-to-let property portfolios to come up with more cash after falling prices slashed the level of their equity.

EDITOR’S CHOICE
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NatWest had asked the owner of a £5m property portfolio in London to hand over £1m in a month to compensate for a 20 per cent drop in value, even though there was no evidence the client was likely to default on the loan.

“This client has sufficient capital to pay if NatWest goes ahead,” said Mr McDowell. “But both the client and I are astonished and dismayed at the bank’s actions, particularly as the rental income on the property far exceeds the interest payments [on the mortgage].”

While not commenting on the case directly, a NatWest spokeswoman said its policy allowed it to review agreements with borrowers if rental income on a property was not enough to allow the customer to service a loan.

Savills Private Finance, the mortgage broker, has seen evidence of banks unexpectedly demanding cash from clients, typically those with high-value, highly geared property portfolios.

Melanie Bien, director of Savills, said this was a new trend as the buy-to-let market was not established in the previous market downturn in the early 1990s. “It is really a feature of the buy-to-let boom and credit crunch.”

The banks’ requests have come as lenders start exercising little-known clauses that allow them to demand additional funds if the owner’s equity shrinks in relation to the value of the property.

Plummeting property prices mean landlords who paid little notice to these hidden clauses when the market was booming are falling foul of the rules.

HFM Columbus, another broker, said HSBC Private Bank had warned a customer with a £10m property portfolio that she might have to come up with more cash. The property had not fallen much in value so she did not have to make the payment.

HSBC said its loan terms generally included a maximum loan-to-value percentage. If these were exceeded “we are likely to require that the position is brought back within covenant”.

..