From the FT:
Buy-to-let landlords could be the biggest beneficiaries of the Bank of England's expanded Funding for Lending Scheme, providing another state-backed fillip to the property market. The BoE gave the go-ahead on Wednesday for banks tapping its new funding mechanism for small- and medium-sized businesses to be allowed to lend the money on to property investors...
Landlords have already benefited under the existing FLS as banks and building societies have passed on lower borrowing costs. The average buy-to-let rate has fallen from 5.09 per cent in August, when the FLS was launched, to 4.28 per cent today, according to figures from Moneyfacts, the financial data provider. This helped push buy-to-let lending up 19 per cent [of all new lending] last year, with the number of buy-to-let mortgages reaching its highest level in four years.
So that's the landlords sorted, and how much interest are the banks paying for the benefit of these taxpayer-backed loans?
From City AM:
WHAT FUNDING IS ON OFFER TO BANKS?
■ Banks and building societies can now access ultra-cheap funds from the Bank of England until January 2015 – an extra year on the previous setup
■ For institutions expanding their lending, the funds cost just 0.25 percentage points per year
■ Those reducing lending have to pay more, on a sliding scale up to a maximum of 1.5 percentage points per year
■ Funds provided under the scheme then last for four years.
So What Will Be Done About The Officer?
28 minutes ago
8 comments:
No doubt the LVT deniers will have a hard time explaining why the chances of lower interest rates (i.e. costs) don't get passed on to renters, whereas LVT would get passed on 100% in their world...
wow - swift turnarounds or what - there I was reading on Monday that: -
"George Osborne is expected to expand his flagship £80bn lending scheme on Wednesday in a bid to boost support for small businesses following criticism that most of the funds have been siphoned off by high street banks to cut homeowner's mortgage costs.
The chancellor plans to extend the Funding for Lending Scheme (FLS) to specifically target banks that lend to small businesses, which are currently starved of credit."
and yet .... it is almost as if the Lending to Small Businesses line is a total smokescreen ....
Momb, to understand that you need to apply Homey Dblthk...
1. The home is worth £100,000, that is real value. Fixed and carved in stone.
2. The landlord has to pay £3,500 in interest to the bank and £2,500 in running costs. He adds on a mark-up of £1,000 for his time and trouble and rents it out for £7,000.
3. Therefore the tenant is paying all the landlord's costs. If the landlord now has to pay LVT as well, the landlord will increase the rent.
4. Interest rate REDUCTIONS (negative LVT) do not benefit the tenant because let's say they drop to 1.5% then the real solid value of the home doubles.
5. So the next landlord also has interest costs of £3,500 etc etc.
6. So interest rate FALLS (or negative LVT) means higher values,
all passed on to the tenant.
7. Conversely, interest rate RISES (or LVT) does not affect the real solid value of the home at all, and all the higher costs are passed on to the tenant.
8. As is well known, interest rates RISES do not affect land values whatsoever, only REDUCTIONS affect land values.
B, bank lending to businesses was negligible to start with and is shrinking all the time, you know that, I know that, small businesses know that. But nobody else seems.
MW - indeed. And surprise of the day is that of all the MSM the Daily Mail appears to be running "the most honest report of what the changes to the FLS mean" because at the DM they read the FT ...
Buy-to-let landlords will be main beneficiaries of £80bn Bank of England lending boost as state tries to stimulate property market
The Bank of England will allow business that borrow money under the Funding for Lending Scheme to pass it on to property investors.
"Rob Wood, chief UK economist at Berenberg Bank, told the Financial Times that although the BoE's extension of the scheme was intended to boost lending to SMEs, it would also bolster the struggling housing market. 'It could be a no-brainer,' he said. 'Lend to a landlord ... and get 10 times that lending back as essentially free funding, then recycle some of that back out again on mortgages or BTL (buy-to-let).'
I wonder if the banks have been working towards this for years, but have always thought "The pols giving us free taxpayers' money to lend out? Nah, it would be great, but the public would never stand for it", but now they have a chancellor obedient enough and brave (or foolish) enough to give it a whirl and lo! no-one has batted an eyelid. Whahay! Triple bonuses all round!
Bob, if even the DM are uneasy about this, then that is progress indeed.
B, yes of course. It's called "don't let a crisis go to waste". And every time they get away with it, they get a bit holder.
Are you certain about this or is it a belief?
"As is well known, interest rates RISES do not affect land values whatsoever, only REDUCTIONS affect land values."
It sounds like DblThnk
RS, yes, good isn't it?
Interest rate reduction -> land prices up, good for landowners
interest rate increase -> landlord passes on higher costs to tenant, tenant loses.
On Planet Homey, the landowner always wins.
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