So, Bradford & Bingley?

What a surprise, not.

Richard has (or is that had?) shares; freebees from when the B&B changed into a bank eight years ago.

We’ve been watching the steady decline of the share value from a high of over £5, to 309 pence just a year ago, and right down to a delisting 20p last friday.

In my opinion, B&B jumped on the buy-to-let bandwagon way to late! They started throwing cash at anyone who could lie about their income on a self-cert form and any amateur landlord who could spot the bandwagon, even after the wheels had started falling off!

Amateur landlords who hadn’t even visited the towns in which they bought their property off-plan; amateur landlords who are now really feeling the pinch as they find their “2 bed 2 bath executive flats” are exactly the same as the other hundred or so “2 bed 2 bath executive flats” bought by the other amateur landlords, also off-plan, in the same (over-developed) development.

Naturally, the tenants out there are having a field day naming their price in terms of rent - plenty of empty very similar flats to choose from. Take your pick!

In fact, throw a stone anywhere in Manchester, Leeds or Cardiff city centres and you’re very likely to hit one!

Now, professional landlords will have done the maths ages ago and will ride out the storm.

But, amateur landlords, on the other hand, will now be having big, big problems:

1. The rental money coming in will already be less than the interest payments on their buy-to-debt (sorry, buy-to-let) mortgage - assuming they even have a tenant.
2. The value of the flat will be less than the mortgage secured on it - too many flats built for, marketed to, and sold to amateur landlords, resulting in over-development in city centres.
3. Their two year fixed rate interest deals will end, and there won’t be any more, and subsequently their interest rates will rocket as banks try to recoup some money whilst actively hoping the landlord will remortgage the property with somebody else: but which banks will want the risk?
4. The rates on the mortgages secured on their own homes will be going up, and probably just as quickly as petrol, food, gas and electricty.

If you were an amateur landlord and you could only make the payment on one mortgage this month, it ain’t gonna be the buy-to-let mortgage is it?

It won’t be long before we start to see loads of these “2 bed 2 bath executive flats” on the market - forcing down their value, and indeed other property, even more.

They won’t sell though, since few people can get a mortgage, and then they’ll be repossessed.

In fact, I wouldn’t be surprised if most amateur landlords wouldn’t simply consider letting the banks just repossess anyway. Why go through all the hasle and expense of selling a flat no-one wants to buy at the moment when you can just say ‘fuck it’ and hand the keys back to the bank. Let them worry about it!

Yes, they’ll be sold, but at auction, to canny professional landlords who bought up loads of investment property during the last slump a decade ago and have been happily collecting the rents whilst sat around waiting for the next property crash.

And they won’t be paying much for them either. The banks won’t get back all the money they lent on the property. They’ll make a loss.

Toxic or what? And you thought it was just about sub-prime mortgages in the States.

Right, big question here. And to be honest, I don’t know the answer. But if I was still in the buy to let market, I’d definately be wanting to find out.

If I had jumped on the bandwagon with the busted wheel and had bought a buy-to-debt (sorry-let) flat, lets just say I stopped paying the mortgage and let the bank (or in B&B’s case, us, as the public owners) repossess the flat and attempt to get the money back.

If the bank does manage to sell (auction off) my buy-to-debt flat and they get back some, but not ALL, of the money they lent me as a mortgage secured on the property (’cause they were stupid enough to lend me 95% or even 100% and were happy for me to lie about my income) then do I technically still owe them the difference? I mean, the loan was secured on that property wasn’t it? Am I liable for the devaluation in the buy-to-let property, or is the bank?

If I was still in the buy-to-let market, I’d be shitting myself right now.

Actually, as an aside, I have to be a little smug here - well, it’s my blog isn’t it.

Rich and I got out of the buy-to-let market and sold both our rental properties six years ago - just when thousands of others amateur landlords spotted the bandwagon and started piling in.

Oh, and after a quick search on rightmove I’ve found a property exactly the same as both of ours in the same road, one of just two on the market out of at least a hundred similar ones in the town!

Me thinks something is very, very wrong in the property market!

When you are desperate to sell your property, you put it on the market with two estate agents in the hope they will compete with each other to find a buyer quickly and get their fee.

Well this property, a one bed house for £139,950 - we sold ours for £115,000 six years ago this month, having bought it for £57,000 two years earlier! - is on the market with four, count them, FOUR, separate estate agents!

Desperate or what?

So, anyway where was I?

Oh, yeah - Anyone want a cheap flat? I mean real cheap? You’ll need the cash, mind - you won’t get a mortgage.

Now’s the time to start planning on making some money.

Start saving as much as you can now and in a couple of years, when the property market has fallen off the proverbial cliff, you can the pick up a few bargain-basement (lol!) flats at auction, rent them out cheaply (since you won’t have the mortgage to cover each month) and sit back rubbing your hands together as you wait for their value to go back up again.

Boom and bust.

….and boom again.

Those property values were way to high in the first place. Still are. The average house price is still far too out of step with the average wage.

There is a big correction to be made.

Downwards.

Proof?

Then how’s this?

August 2007 - £7,150 million.

July 2008 - £2,860 million.

A drop of 60% in 11 months.

So what am I talking about?

Yep, nett money lent by our banks in the UK for mortgages.

Ah, but wait…

August 2008?

£143 million.

Shit. That’s a drop of 98% in one year.

Oh, and a massive drop of 95% in JUST ONE MONTH.

Credit Crunch? or Credit Crisis?

How about a Credit Crash!

Hold on; gonna be a rough ride, and we’ve hardly even started!

Bye-bye B&B…

I wonder who’s next?

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