Government warned for 3 years lending changes would create issues

[Olive]

my bank is falling over its feet to give me money
but i have no mortgage or debt, that might be a factor.

I have no mortgage loan or debt, for decades have always paid my credit card balance in full when due, but about six months ago when I asked for a temporary increase in my credit card limit I was subjected to an extraordinarily intrusive interrogation.   First of all a phone conversation with someone who sounded about 15 and was reading from a script.   Then I had to send bank statements and tax records for the past year.  Then a further conversation in which I was accused of withholding information because "there is no record of your spending on clothes" ( I don't buy new clothes).   By that time I was so outraged that I just told her to forget it.

I completely understand that the legislation was aimed at protecting vulnerable people from predatory lenders, but it seems that either the banks have misinterpreted it or it was poorly written.

[Magoo]

poorly written, poorly thought through, poorly timed and poorly consulted

[king1]

my bank is falling over its feet to give me money
but i have no mortgage or debt, that might be a factor.

I have no mortgage loan or debt, for decades have always paid my credit card balance in full when due, but about six months ago when I asked for a temporary increase in my credit card limit I was subjected to an extraordinarily intrusive interrogation.   First of all a phone conversation with someone who sounded about 15 and was reading from a script.   Then I had to send bank statements and tax records for the past year.  Then a further conversation in which I was accused of withholding information because "there is no record of your spending on clothes" ( I don't buy new clothes).   By that time I was so outraged that I just told her to forget it.

I completely understand that the legislation was aimed at protecting vulnerable people from predatory lenders, but it seems that either the banks have misinterpreted it or it was poorly written.

this does seem to suggest that the banks were tightening up the lending criteria a lot earlier than when the new laws came into force.
So maybe the government is just being made a scapegoat by/for the banks change in lending policy

[reigns]

Property investors have been baling out big time in case you haven't noticed. The government has hit them every way it can so many have simply given up. So what you have left is a shortage of rental properties driving rents up. The one thing that is in their favour is that the government has also driven house prices sky high so that selling has become even more attractive.

Bargains can only be snapped up if they are there. If there's a potential owner-occupier at an auction they will always over-bid investors.

Good. Rents went up consistently before property investors were bailing out big time so I'm not convinced that fleeing "investors" is rent cost villain here. Renters have been squeezed for ages, it's only now that that squeeze is finally tight enough to hit landlords.

Instead of crying about how hard it is now, they should be grateful they got away with creaming it for so long.

[Oh_hunnihunni]

There is no shortage of rental properties. I have a friend looking now and she has seen a lot of flats. Thing is they are all too expensive...

Good tenants deserve recognition with affordable rent packages that will give them and their landlord security and a sensible return.

[Lilith7]

IF property investors really are baling out, then there may be some hope of a return to affordable rents. Presumably not too many landlords want empty properties, & would prefer to set a realistic rent rather than have the risk of possible damage while sitting empty.

[SueDonim]

Coming back to the original heading - the government was warned for years. Not just about bank rules, but about everything else too. That all their changes would just make things harder for everyone but of course they didn't listen.

"Rents went up consistently before property investors were bailing out big time ... Renters have been squeezed for ages, it's only now that that squeeze is finally tight enough to hit landlords."

-Rents have always gone up, just like everything else. They used to be primarily linked to interest rates, but now also have to incorporate all the extra costs imposed by the government - which the government was warned about... And so on.

"Instead of crying about how hard it is now, they should be grateful they got away with creaming it for so long".

-On the whole, landlords have never "creamed it". They are just trying to make a living like everyone else. Supermarket owners, power companies, mechanics, furniture shops, etc are all essential businesses expected to make a profit but somehow landlords are expected to work hard and give everything to the tenants. Sorry, but they work hard (often harder than others) and need to make a profit =just like everyone else in business. Except that the free market no longer applies and interest is no longer deductible... And so it goes.

"There is no shortage of rental properties. I have a friend looking now and she has seen a lot of flats. Thing is they are all too expensive..."

-Sorry, but there is a shortage. Our town has a whole 2 available and the adjacent city has only 33. There are a LOT more people than that looking for properties, and overall the number is down. One benefit of the current situation is that good tenants are staying put because they know they can't find any alternatives.

"IF property investors really are baling out, then there may be some hope of a return to affordable rents."

-The landlords bailing out has  been a significant contributor to the housing shortage - fewer rentals available. Remember that when a formerly rental house becomes owner occupied, it most often doesn't free up a rental. The shortage then forces the prices up, just like any other commodity.

"Presumably not too many landlords want empty properties..."

-There have always been property owners that landbanked instead of having tenants. Now there are likely more than ever when they can get capital gain without the risk of having the property wrecked along the way.

"...would prefer to set a realistic rent rather than have the risk of possible damage while sitting empty."

-The biggest risk is that caused by tenants, especially now that the landlord has to jump through hoops to get rid of a bad tenant. Even a good tenant costs wear and tear over time. Leaving a house sitting empty is far safer.

[Lilith7]

"landlords have never creamed it.!"
Complete bollocks. When students were given a rise in funding to help with hardship, some landlords increased their student rents by exactly the amount of that rise.

Some of them were reasonable & didn't over charge but some set very high rents despite knowing it would cause hardship.

[SueDonim]

"landlords have never creamed it.!"
Complete bollocks. When students were given a rise in funding to help with  hardship, some landlords increased their student rents by exactly the amount of that rise.

Some of them were reasonable & didn't over charge but some set very high rents despite knowing it would cause hardship.

So maybe the students were on a discounted rent and the landlord just brought it up to market rate. Or something. Unless you were that landlord you don't know. There are of course some bad landlords, but on the whole profits have never been extreme and most landlords are good. They need to be to protect their investments. Would you work 90 hours a week for three months renovating a house ready for tenants whilst also earning the money needed to pay for it? Would you spend Christmas Day repairing a major water leak and drying the bedroom carpet while the tenants have their Christmas? I've done both.

[Olive]

Why would a landlord do those things? I think the prospect of huge capital gains might have something to do with it.

[SueDonim]

Why would a landlord do those things?  I think the prospect of huge capital gains might have something to do with it.

We do those things because that's what being a landlord involves and the long term reward is income for retirement. Huge capital gain has only been recent and only applies if you sell. On the whole, investors don't sell. They're not traders. They are investors and in it for the long haul. Warts and all. Except those that got sick of the new rules and bailed.

[Oh_hunnihunni]

SueDonim is right. Here in the overpriced leafy suburbs we have a lot of ghost properties. Most owned by overseas investors. It is sad really, houses need to be occupied and loved. Especially these pretty ones.

---

"landlords have never creamed it.!"
Complete bollocks. When students were given a rise in funding to help with  hardship, some landlords increased their student rents by exactly the amount of that rise.

Some of them were reasonable & didn't over charge but some set very high rents despite knowing it would cause hardship.

So maybe the students were on a discounted rent and the landlord just brought it up to market rate. Or something. Unless you were that landlord you don't know. There are of course some bad landlords, but on the whole profits have never been extreme and most landlords are good. They need to be to protect their investments. Would you work 90 hours a week for three months renovating a house ready for tenants whilst also earning the money needed to pay for it? Would you spend Christmas Day repairing a major water leak and drying the bedroom carpet while the tenants have their Christmas? I've done both.

I have had some really bad landlords, but a couple of truly wonderful ones too. Unfortunately they are outnumbered in my personal experience. And one in particular let me walk through very wet squelchy carpet for a week before he put a tarp over the roof and organised repairs. Which weren't that successful. Meantime my furniture suffered. A memorable time, I was so glad to give notice there and succeed in getting into this safe haven.
Funny thing, I googled that horrible little flat recently. It had had a basic makeover, was put on the market, and sold for over $700K. If a slum with a coat of paint can get that kind of money, who can blame the owner for selling up? I sure would...

[Lilith7]

"landlords have never creamed it.!"
Complete bollocks. When students were given a rise in funding to help with  hardship, some landlords increased their student rents by exactly the amount of that rise.

Some of them were reasonable & didn't over charge but some set very high rents despite knowing it would cause hardship.

So maybe the students were on a discounted rent and the landlord just brought it up to market rate. Or something. Unless you were that landlord you don't know. There are of course some bad landlords, but on the whole profits have never been extreme and most landlords are good. They need to be to protect their investments. Would you work 90 hours a week for three months renovating a house ready for tenants whilst also earning the money needed to pay for it? Would you spend Christmas Day repairing a major water leak and drying the bedroom carpet while the tenants have their Christmas? I've done both.

They were not.
Their high rents was a big part of WHY they needed help & were suffering hardship.

'Protecting an investment' is one thing. Rack renting is quite another. 
And btw there were several landlords who did that, not just one.

[Wainuiguy]

I have no mortgage loan or debt, for decades have always paid my credit card balance in full when due, but about six months ago when I asked for a temporary increase in my credit card limit I was subjected to an extraordinarily intrusive interrogation.   First of all a phone conversation with someone who sounded about 15 and was reading from a script.   Then I had to send bank statements and tax records for the past year.  Then a further conversation in which I was accused of withholding information because "there is no record of your spending on clothes" ( I don't buy new clothes).   By that time I was so outraged that I just told her to forget it.

I completely understand that the legislation was aimed at protecting vulnerable people from predatory lenders, but it seems that either the banks have misinterpreted it or it was poorly written.

this does seem to suggest that the banks were tightening up the lending criteria a lot earlier than when the new laws came into force.
So maybe the government is just being made a scapegoat by/for the banks change in lending policy

So first you say that the banks want kill the new law because it would be bad for them then you say they are implementing them early.  Hmmmm

[king1]

this does seem to suggest that the banks were tightening up the lending criteria a lot earlier than when the new laws came into force.
So maybe the government is just being made a scapegoat by/for the banks change in lending policy

So first you say that the banks want kill the new law because it would be bad for them then you say they are implementing them early.  Hmmmm

well it makes sense really if you think about it.  At some stage in the near future banks are going to want to loosen there lending criteria when the money is flowing a bit more; at that point they won't be wanting these pesky new laws getting in the way. 

For now though, it suits their purpose to portray the government and new regs as the problem rather than their own currently restrictive lending policies ...

[Wainuiguy]

Reality - the laws designed to stop predatory lending have had unintended consequences because once again this government doesn't listen to the experts. Now they are scambling to try and resolve it and attempting to deflect. Easy to blame the banks but failure to adhere to the new laws have serious consequences for lenders. Of course they will be cautious.

[king1]

Reality - the laws designed to stop predatory lending have had unintended consequences because once again this government doesn't listen to the experts.  Now they are scambling to try and resolve it and attempting to deflect.  Easy to blame the banks but failure to adhere to the new laws have serious consequences for lenders.  Of course they will be cautious.

Reality would also suggest that those "unintended consequences" you speak of were already happening, well before the law was passed.  

These "experts" you talk of - according to the article it is the banks that were warning them, no doubt said with the slightest twist of self interest. 

But hey, they're investigating the matter, we shall see where the cards fall, but it is perhaps a bit too early to say whether they got it right or wrong - some outraged applicant whose loan was denied doesn't suggest anything is at all wrong.  

If we're really talking about 'reality' here, the reality is, a law intended to stop people getting into excessive debt at the whims of the lenders whose lending policies change from year to year, finds borrowers that otherwise would be able to lend money no longer can, then on the face of it I would say it is working as intended. Hard to see this as a "Government ain't listening" issue...

[Wainuiguy]

Reality - the laws designed to stop predatory lending have had unintended consequences because once again this government doesn't listen to the experts.  Now they are scambling to try and resolve it and attempting to deflect.  Easy to blame the banks but failure to adhere to the new laws have serious consequences for lenders.  Of course they will be cautious.

Reality would also suggest that those "unintended consequences" you speak of were already happening, well before the law was passed.  

These "experts" you talk of - according to the article it is the banks that were warning them, no doubt said with the slightest twist of self interest. 

But hey, they're investigating the matter, we shall see where the cards fall, but it is perhaps a bit too early to say whether they got it right or wrong - some outraged applicant whose loan was denied doesn't suggest anything is at all wrong.  

If we're really talking about 'reality' here, the reality is, a law intended to stop people getting into excessive debt at the whims of the lenders whose lending policies change from year to year, finds borrowers that otherwise would be able to lend money no longer can, then on the face of it I would say it is working as intended.  Hard to see this as a "Government ain't listening" issue...

Hmmmm similar to the investigation into petrol prices?  Or climbing food prices?

I wonder did they quietly put that petrol investigation aside when ,shock horror, they realised the largest part of the cost went into the governments hands?
Like that one this one will be quietly placed in a bottom draw when they realised oops our bad....

[reigns]

Apologies for bringing up an old thread but I was away and now I'm semi back and want to reply.

"Rents went up consistently before property investors were bailing out big time ... Renters have been squeezed for ages, it's only now that that squeeze is finally tight enough to hit landlords."

Rents have always gone up, just like everything else. They used to be primarily linked to interest rates, but now also have to incorporate all the extra costs imposed by the government - which the government was warned about... And so on.

Those "extra costs imposed by the Government" are because, regardless of how "rents have always gone up", the quality of rentals has lagged behind. Rentals being shittier than owner-occupied homes is a feature the world over but is commonly a result of a landlords lack of financial ability or lack of care to do more than is profitable, and either weak or non-existent housing regulation to support the quality of rentals. Our rental stock was noted to have worrying levels of mould, a lack of insulation for our weather, and poor maintenance.

Landlords, as a whole, don't want costs to increase upon themselves because it hurts their profit. That's the #1 concern. No landlord is providing a rental for the main benefit of the tenant. And when it comes to landlords, they also have the political capital and power to put pressure on any regulation that might hurt their profit margin (see: multiple property owners getting to vote in multiple council elections, and landlords considering rent rise threats on tenants over possible Labour CGT introductions).

Because regardless of how and when some landlords try to squeeze public pity for themselves by dangling their "poor tenants" as victims, truth is that tenants are used as political hostages in order to protect landlord profitability.

As for interest rates, they've consistently fallen since the often cried about 1980s where mortgage rates were in the late 20-percent region. Rents, however, have climbed higher and ever higher. Even before the "extra costs". When rent rises slowed behind the costs of owning a rental, it was more because tenants were already being stretched to their income's limit in terms of paying for housing. Not because landlords were being saints and putting themselves in financial hardship.

Landlords have tenants not because they like being altruistic but because no landlord could realistically afford the cost of owning two or more homes on their own incomes alone (let's set aside the fact that rents are also income, because that income is being paid for by someone else's labour - not because of your own). By that fact alone, it's an admission that the business of being a landlord is paying for your personal asset that has grown leaps and bounds for decades while the actual income of the people who are paying for your "service" have lagged behind your rent charges and everything else..

Speaking of which:

"Instead of crying about how hard it is now, they should be grateful they got away with creaming it for so long".

-On the whole, landlords have never "creamed it". They are just trying to make a living like everyone else. Supermarket owners, power companies, mechanics, furniture shops, etc are all essential businesses expected to make a profit but somehow landlords are expected to work hard and give everything to the tenants. Sorry, but they work hard (often harder than others) and need to make a profit =just like everyone else in business. Except that the free market no longer applies and interest is no longer deductible... And so it goes.

No investor would hold onto an asset that costs them more money than they can afford. So if you're not gaining in terms of passive income, capital gains or both as a landlord, then you're probably not a landlord anymore. Either because you lost your property due to bankruptcy or your sold out because you're smarter than the guy that did go bankrupt.

But, and to your point about other businesses such as supermarkets, power companies, mechanics, etc etc.. They all have regulations and compliance measures that they must meet in order to ensure a level of quality and service to their customers. The state of rental housing is what it was because of piss poor or non-existent regulations on landlords that encouraged a certain level of quality. The free market, as you mention, clearly wasn't providing it by itself. Now, if the product or service being offered was something inconsequential or luxurious but unnecessary to a person's basic needs, then who would care if there was no regulation? But we're talking about housing where on one side landlords are investors demanding a profitable return and on the other we have "customers" who have very little power or say in the product and service they receive.

If a supermarket sells me a mouldy loaf of bread, they have to replace it. If a power line goes down in a residential street, the power company shows up as soon as possible to rectify the fault. They're constantly working to maintain their infrastructure so that it doesn't fail. If a mechanic grossly overcharges me, I can either take the issue up with the MTA or I have the Consumers Guarantee Act to provide me with protection for dodgy service providers.

If I have an issue with a landlord, I have to take it to the Tenancy Tribunal and while I might just get a successful complaint upheld there, I risk putting myself on a black list and making it harder for me to find a replacement rental if that landlord is well connected, or if prospective landlords are uncomfortable with me having an interrupted tenancy. Tenants have such little power that when a Government finally does pull its finger from its arse and introduce regulations to fix the gaps in which the market doesn't and won't provide (because it's not profitable for landlords), most tenants won't have anything they can do if their landlord goes and passes the cost directly off onto them.

So, unlike other businesses, landlords have had it pretty fucking sweet. Landlords don't work a full 40 hour week to pay the mortgage of their rental properties, their tenants do. In the event their tenant is a welfare recipient, the taxpayer is working hard so that landlords can have their second, third, fourth mortgage paid for by someone else other than themselves. When you're sick of being a landlord, you can sell the rental and take home a huge payday that's tax free if you do it right.

The mortgage I pay now is less than the cost of a rental property that was available at the same time I purchased. Same size house, same quality. The house itself sold four months before I bought, for $200k less. So it sold earlier, for less money, probably around the same interest rate, and yet somehow the tenant across the road is paying more per week than I am. Even factoring in rates, maintenance, insurance and all the other shit I have to cover myself, at the end of the day my income is going towards an asset that I own myself.

The tenant across the street is probably going backwards financially, all while paying the mortgage of an asset of their landlord.

So, respectfully, landlords can fuck right off.

[Lilith7]

Apologies for bringing up an old thread but I was away and now I'm semi back and want to reply.

"Rents went up consistently before property investors were bailing out big time ... Renters have been squeezed for ages, it's only now that that squeeze is finally tight enough to hit landlords."

Rents have always gone up, just like everything else. They used to be primarily linked to interest rates, but now also have to incorporate all the extra costs imposed by the government - which the government was warned about... And so on.

Those "extra costs imposed by the Government" are because, regardless of how "rents have always gone up", the quality of rentals has lagged behind. Rentals being shittier than owner-occupied homes is a feature the world over but is commonly a result of a landlords lack of financial ability or lack of care to do more than is profitable, and either weak or non-existent housing regulation to support the quality of rentals. Our rental stock was noted to have worrying levels of mould, a lack of insulation for our weather, and poor maintenance.

Landlords, as a whole, don't want costs to increase upon themselves because it hurts their profit. That's the #1 concern. No landlord is providing a rental for the main benefit of the tenant. And when it comes to landlords, they also have the political capital and power to put pressure on any regulation that might hurt their profit margin (see: multiple property owners getting to vote in multiple council elections, and landlords considering rent rise threats on tenants over possible Labour CGT introductions).

Because regardless of how and when some landlords try to squeeze public pity for themselves by dangling their "poor tenants" as victims, truth is that tenants are used as political hostages in order to protect landlord profitability.

As for interest rates, they've consistently fallen since the often cried about 1980s where mortgage rates were in the late 20-percent region. Rents, however, have climbed higher and ever higher. Even before the "extra costs". When rent rises slowed behind the costs of owning a rental, it was more because tenants were already being stretched to their income's limit in terms of paying for housing. Not because landlords were being saints and putting themselves in financial hardship.

Landlords have tenants not because they like being altruistic but because no landlord could realistically afford the cost of owning two or more homes on their own incomes alone (let's set aside the fact that rents are also income, because that income is being paid for by someone else's labour - not because of your own). By that fact alone, it's an admission that the business of being a landlord is paying for your personal asset that has grown leaps and bounds for decades while the actual income of the people who are paying for your "service" have lagged behind your rent charges and everything else..

Speaking of which:

"Instead of crying about how hard it is now, they should be grateful they got away with creaming it for so long".

-On the whole, landlords have never "creamed it". They are just trying to make a living like everyone else. Supermarket owners, power companies, mechanics, furniture shops, etc are all essential businesses expected to make a profit but somehow landlords are expected to work hard and give everything to the tenants. Sorry, but they work hard (often harder than others) and need to make a profit =just like everyone else in business. Except that the free market no longer applies and interest is no longer deductible... And so it goes.

No investor would hold onto an asset that costs them more money than they can afford. So if you're not gaining in terms of passive income, capital gains or both as a landlord, then you're probably not a landlord anymore. Either because you lost your property due to bankruptcy or your sold out because you're smarter than the guy that did go bankrupt.

But, and to your point about other businesses such as supermarkets, power companies, mechanics, etc etc.. They all have regulations and compliance measures that they must meet in order to ensure a level of quality and service to their customers. The state of rental housing is what it was because of piss poor or non-existent regulations on landlords that encouraged a certain level of quality. The free market, as you mention, clearly wasn't providing it by itself. Now, if the product or service being offered was something inconsequential or luxurious but unnecessary to a person's basic needs, then who would care if there was no regulation? But we're talking about housing where on one side landlords are investors demanding a profitable return and on the other we have "customers" who have very little power or say in the product and service they receive.

If a supermarket sells me a mouldy loaf of bread, they have to replace it. If a power line goes down in a residential street, the power company shows up as soon as possible to rectify the fault. They're constantly working to maintain their infrastructure so that it doesn't fail. If a mechanic grossly overcharges me, I can either take the issue up with the MTA or I have the Consumers Guarantee Act to provide me with protection for dodgy service providers.

If I have an issue with a landlord, I have to take it to the Tenancy Tribunal and while I might just get a successful complaint upheld there, I risk putting myself on a black list and making it harder for me to find a replacement rental if that landlord is well connected, or if prospective landlords are uncomfortable with me having an interrupted tenancy. Tenants have such little power that when a Government finally does pull its finger from its arse and introduce regulations to fix the gaps in which the market doesn't and won't provide (because it's not profitable for landlords), most tenants won't have anything they can do if their landlord goes and passes the cost directly off onto them.

So, unlike other businesses, landlords have had it pretty fucking sweet. Landlords don't work a full 40 hour week to pay the mortgage of their rental properties, their tenants do. In the event their tenant is a welfare recipient, the taxpayer is working hard so that landlords can have their second, third, fourth mortgage paid for by someone else other than themselves. When you're sick of being a landlord, you can sell the rental and take home a huge payday that's tax free if you do it right.

The mortgage I pay now is less than the cost of a rental property that was available at the same time I purchased. Same size house, same quality. The house itself sold four months before I bought, for $200k less. So it sold earlier, for less money, probably around the same interest rate, and yet somehow the tenant across the road is paying more per week than I am. Even factoring in rates, maintenance, insurance and all the other shit I have to cover myself, at the end of the day my income is going towards an asset that I own myself.

The tenant across the street is probably going backwards financially, all while paying the mortgage of an asset of their landlord.

So, respectfully, landlords can fuck right off.

Don't apologise - that was well said, & sums up the situation very thoughtfully.

I especially liked your final sentence, & I doubt I'll be the only one to appreciate it.