Any thoughts? http://morganisteconomics.blogspot.co.uk/2012/08/debt-and-pay-there-has-to-be-balance.html
wtf? "These so called 'Buy to let' properties, which often have to make mortgage payments with the rental income, could suffer. However I think that this type of product is immoral. To me it appears that the bank has decided that someone can borrow money to buy a property and rent it out to someone else who pays the mortgage for them. I don't think that this type of agreement should be allowed. It is basically the bank saying that one person can have free money to take advantage of someone else who is less fortunate. The only thing that differentiates the landlord from the tenant is the fact that the bank allowed the landlord to borrow money. It is like giving one person free money at the expense of someone else because they have a better credit rating. "
Many of the rented properties in the UK have existing mortgages on them from the landlord. The tenant pays the mortgage for them with the rent. If the rent cannot be made it may impair mortgage repayment. Is it morally right to allow one person to rent out a property when they do not own it. They are basically getting a house bought for them by someone else just because the bank allowed them to borrow the money to buy the house.
you want to throw the free market out in property? why shouldnt a property owner be able to rent out his property? in every business in the end its the customer who pays the mortgage.
The article starts out good, then ( ..barf..) concluding with "screw" the landlord economics. You should hook up with a few landlords and offer suggestions on how to collect rent. I understand your concept. Rental real estate is a pretty conservative way to lose money, we should keep it as is..
The decision by the bank on who is lent the money determines who can buy the property. As I said the only difference between the landlord and the tenant on a mortgaged property is who the bank decided to lend the money to. In any event there is definitely no justification for the rents being as high as they have been. I think this will come back to bite the landlords on the butt. When the recession really hits and people can't pay rent the mortgaged landlords could lose the property. This happened a lot in the UK in 2008. I suspect it will happen again.
How else are you going to make sure people have enough money to pay off their debt without cutting interest rates further or QE, which will create inflation. To me it seems like the only way to pay off the outstanding debt without defaulting. Do you have any other suggestions?
supply and demand. without demand the landlord cant charge that high of rent. simple free market principles.
No the only reason that the rents were so high was because the central bank lowered the interest rate pushing property prices up. This then enabled landlords to take advantage of people pushed out of the property market. Also the low interest rates and high levels of debt enabled some people in society to buy houses with debt not in saved income. This was an unfair advantage to the few that could do this. This is not free market economic strategy. The interest rate cut was a form of centrally planned intervention. This whole property bubble was designed and implemented by the central banks and government. It is far from free market economics. When the central bank intervenes it is not a free market economy. The housing bubble and the consequences that resulted, including high rental costs, were as a result of the central bank and government trying to hit inflation and money supply targets. This is a centrally planned mechanism.
still, the tenents are willing to pay what the landlord is asking(demand) for whatever reason. if the tenents all decided the price was too high and moved out the landlord would soon lower his rent. supply and demand at work.