Monthly Archives: June 2014

Waging war on The Wonga Man – Naming the real culprits

I have been listening lately to a lot of loose talk about the evil Wonga, sending out fake solicitors’ letters to borrowers etc who fail to pay up. There has been much hand-wringing and chest-beating about how it’s ‘so disgusting’ that they hound these hapless people.

The hand-wringers, including many media pundits say, ‘We must put checks on these evil pay day loan companies!’ But I say they are concentrating on the effect rather than the cause. The clue, for all these folk incapable of original thought, is in the name, ‘PAY DAY LOAN’. Apart from a small minority of feckless borrowers and losers, essentially pay day loans are designed as a LOAN to tide honest but lowly paid people over until PAY DAY.

In the dim distant past when god was a boy, people on modest incomes were paid WAGES. And they came in manilla envelopes with holes in them, containing cash…and they were paid WEEKLY! In other words, you started work on Monday and you got your money on Friday. More posh people with higher incomes were paid MONTHLY and they received SALARIES and they were paid into their bank accounts. Because once upon a time only posh people had bank accounts – including me, although I’m not really posh.

On top of all this, globalisation has allowed large businesses to basically take the piss (technical term) out of ordinary workers. In 1984 I used to pay my assistant £10.00 an hour. The going rate, 30 years later is about…£10.00 an hour. In the meantime, property and rental prices have increased a little bit as you may have noticed.

So, what we have is a situation where lowly paid people are forced to give major companies an average of 15 days’ credit every month. This is because they supply their labour on the first day of the month but don’t receive their pay until 30 days later, thus giving an average of 15 days’ credit to their employers! In the meantime, they may be faced with unavoidable one-off expenses like they need their car repaired (in order to get to work) and have to BORROW from Mr Wonga or others to pay the mechanic, who won’t advance them credit. The same case could be that they need to pay their landlord the rent, so they top up what they need by borrowing from a PAY DAY LOAN company.

These companies exist because there is a need for them and part of that need has been created by the nonsense of everybody having to wait 30 days to be paid and then the money is paid into their BANK account. And we all know about how sympathetically banks deal with poor people who go overdrawn, don’t we.

The answer I think, is that it should be made compulsory in law for people below a certain level of pay to be offered the option of receiving their money WEEKLY.

UPDATE August 2018
WONGA closes its doors after hefty compensation claims.

LandlordsandLetting

Mark Carney – teasing us all over interest rates

Will he raise interest rates or won’t he? When will he do it? Sooner…or later?

The Governor of The Bank of England is teasing us because he is in a bit of a fix. He knows that in London and South East England the property market is getting rather out of control, with property prices bearing no relation at all to people’s incomes – apart from Wayne Rooney of course. It’s looking a bit suspiciously like 2007.

So what will he do? The thing is that the Bank is supposed to be INDEPENDENT, isn’t it? But remember that Mark Carney was appointed by George Osborne..and he who pays the piper… An interest rate rise before the next election would be very bad news indeed for the Conservatives, facing as they do an uphill struggle to gain seats next time after the slimy LibDems blocked constituency boundary changes, making it a real possibility that Idiot Labour may get back in – so much for democracy.

Personally, I would bet (not TOO much) that the Bank of England will not raise rates before next May but will continue to put restrictions on LTV offered by mortgage providers and constantly fire shots across the bows of prospective property investors. He’s already been doing that by saying that he may have to consider raising interest rates earlier rather than later, and that he is very concerned at the potentially destabilising effect of the housing market. I think this strategy will work, as the real problem with the housing market is that, like so many of Dominic Littlewood’s Cowboy Builders’ work, it is built on shaky foundations. The fact is that it’s built on a ludicrously low and ultimately unmanageable 0.5% base rate, making saving and prudent money management pointless, particularly when you factor in inflation.

LandlordsandLetting – Landlord Insurance and Buying to Let Advice

 

Possible interest rate rise may push rental values even higher

It’s obvious that the Bank of England and the government are caught in a dilemma over the current state of the property market. If Mark Carney decides to raise interest rates to reign in the rise and rise of property prices, will that have a negative impact on other areas of the economy that need help?

I suppose the answer is, yes, it probably will.

Of course, the beauty of buy to let as an investment tool is that what you lose on the capital gain swings you usually gain on the rental yield roundabouts. If many struggling first-time buyers are stopped from getting on to the proverbial housing ladder their only real alternative will be renting, which will, assuming there is not a general decline in incomes, drive up rents even higher. This is of course great for landlords but not so great for tenants.

It’s impossible to be original when discussing this dilemma because the only real answer is to build more flats and houses, both to buy and to rent, coupled with of course the need to get a proper grip on immigration into South East England.

As a caveat for landlords, rising rents do carry the possibility of more widespread defaults by tenants and does underline the advisability of protecting your rental income.

 

Will Labour re-introduce rent controls?

It does seem that the spectre of rent control seems to be making a bit of a comeback – particularly in London. The argument is that rents in London are ‘out of control’ and therefore need to be ‘controlled’. Of course it is an argument mainly only put forward by misguided  Labour politicians, who seem to have forgotten what happened the last time that introduced rent controls.

Rents and all property costs are indeed very high in London but that is simply down to massive demand, partly because of immigration and the attraction of the capital to business and wealthy people and inadequate supply. It is really awful for young people particularly who need to work in London and are forced to rent because they cannot find the huge amount of cash needed for a deposit these days. However, if the government were to attempt to state how much, let’s say a two bedroom flat in Westminster should be, then how would they allocate which one of the 150 or so people bidding for it actually were allowed to rent it?! Perhaps they would have a lottery, or maybe a beauty contest or perhaps some form of physical test! All that will happen if the authorities are ever stupid enough to bring in rent control is that landlords will start putting flats and house up for sale.

However, I do think the idea being touted of giving tenants the opportunity to get more security from rent reviews by allowing 3 year tenancies is a good idea. It is important that people who are renting can plan more than is possible at the moment. This would of course have to go hand in hand with more power for landlords to QUICKLY evict bad tenants who damage the property or stop paying the rent.

Of course the only answer to reducing rents/house prices in London is to simply build more flats and houses.

LandlordsandLetting

Is George’s Budget good news for would-be buy to let landlords?

George Osborne relaxed the rules on how pensioners can use their pension pot on retirement. And that is very good news, because instead of being forced to buy an annuity with poor returns they will be free to use their pension just as they wish.

People will be able to spend it on Bingo, wine, women, men(?), perhaps even song. But I reckon the majority will use it rather more wisely to invest in property in the form of buying to let. The great thing about being a buy to let landlord is that you invest your cash DIRECT – there is no middle man taking a percentage for managing the asset (apart from a letting agent if you are forced to use one). Your money goes 100% into the investment.

But there’s only one possible downside, and that is the fact that more landlords might well mean downward pressure on rents – you can’t win can you!

Landlords and Letting

Why landlord rent guarantee and legal expenses insurance matters

It’s great once you’ve found what appear to be good tenants and you can finally breath a sigh of relief that at last you’ll be getting rent in to cover your own expenses. And if you let the property yourself you will be saving a lot of money by not employing a letting agent.

The problem for landlords letting property themselves, though, is that they can sometimes be a bit too trusting. That young couple who turned up at the flat seemed so nice and they both appeared to be friendly and have good jobs…don’t they? The thing is that rogue tenants are more likely to go for property that’s being let direct by the landlord rather than going via letting agencies. This is because agents are VERY strict and always rigidly reference tenants and they tend not to be as easy going as the landlords themselves.

And of course, that nice couple may actually be nice but they might lose their jobs…or split up.

So, if you’re letting your valuable property yourself it really is advisable to get some form of rent protection insurance. Not only will this insurance kick in and pay your rent if the tenants default but it will also arrange and cover the cost of expert legal help to evict the tenants. The other aspect is that practically all Landlord Rent Guarantee policies require that the tenants are scrupulously referenced and their identity firmly verified. This aspect alone tends to scare of dodgy tenants.

It usually costs only around £100 a year for up to several tenants and given that you’re likely to be saving many £100s by not using a letting agent, it really does make good sense to take it out!

LandlordsandLetting offers Landlord Rent Guarantee and Legal Expenses Insurance from as little as £53.00 for six months’ cover or £99.00 for 12 months.