Should Buy to Let Landlords be worried about Scottish Independence?

Should Buy to Let Landlords be worried about Scottish Independence?

16:16 PM, 11th June 2014, About 8 years ago 14

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Scotland’s big three banks RBS, Bank of Scotland and Clydesdale are over 12 times in value the size of the total Scottish economy, where as currently UK banks are just over 4 times the size of the economy.

In practical terms that would mean if Scotland were to vote for independence they would not be able to guarantee or bail their banks out if we had another banking crisis.

Does that mean if banks could no longer count on the Bank of England as the lender of last resort they would leave the country?

I don’t honestly know, but would you deposit your savings knowing they would not be guaranteed in the event of something similar happening. I suspect not and this is only where the problems start. Their cost of borrowing could also increase as it is likely their credit rating would be down graded, because of the smaller economy.

Reuters have reported from several banking sources that RBS, and part nationalised Lloyds Banking group which owns Bank of Scotland based in Edinburgh, have started drawing up contingency plans in the event of a Yes for independence vote on the 18th of September.

Vince Cable the UKs business secretary has already stated that he believes RBS would move its HQ from Edinburgh to London.

Scottish Nationalists have said they would like to keep the pound in a currency union along with British backing for its banks if the Bank of England were to retain monetary control. However David Cameron has already said that this would be extremely difficult – meaning unlikely.

Reuters figures also suggest that the British tax payer bail out of RBS in 2008 would have cost every member of Scotland’s population £8,800.

So the question is what would happen to the BTL industry in Scotland. Would you be able to remortgage a BTL property, would there be any new BTL loans to make purchases and is it possible Banks south of the boarded would try to call in existing loans.

These questions may all be at the worst case scenario end of the spectrum, but I don’t see much evidence at the moment of anyone asking them.

I am a concerned half Scot (family from Aberdeen) that is not allowed to vote.Scottish Independence



Comments

Neil Patterson View Profile

11:47 AM, 13th June 2014, About 8 years ago

Hi Richard,

If the Vote is yes then we do not know what Banks will be left, what currency will be used and what interest rates will be.

Howard Reuben CeMap CeRER View Profile

13:17 PM, 15th June 2014, About 8 years ago

For nearly ten years now, one of our most prolific BTL Clients has been a gentleman who lives, works and invests in Scotland.

Even though we are based in Colchester, Essex, we have been his preferred Broker for all of these years and we have completed on hundreds of deals for him.

He is worried about Scottish independence (he doesn't want it) and as a full time property investor - mainly using English lenders for his financing - he is concerned how the financial logistics may change and what funding lines he may have access to if it does go against his own vote.

With a panic-stricken strategy in mind, he is currently filling his boots.

Approx 15 deals a month are being done at the mo - some buy and sell, some buy and keep, and he's trying to maximise his profits and portfolio now just in case he can't in case of Scottish independence.

He is shrewd, intelligent, ambitious, entrepreneurial and .... if he's worried, then I'm sure most others are too.

Richard Adams

14:56 PM, 15th June 2014, About 8 years ago

Reply to the comment left by "Howard Reuben" at "15/06/2014 - 13:17":

My tiny situation won't be affected either way as I shall by out of my one BTL in 5 years or so with or without negative equity regardless of the referendum outcome.

But I just don't get what the long term fears are in Scotland for seasoned investors with big portfolios up there in event of yes vote? Nobody is spelling them out. Is it English lenders withdrawing and/or Scottish lenders stepping in with only alternative on punitive terms and high interest? In this scenario might not cash buyers find some nice deals dropping in their laps?

This assumes that even Salmond cannot somehow kill the private rented sector off either by desire or accident. Is that the fear that anti landlord sentiment is rife in the SNP and they will set out to deliberately stuff landlords?

Or is this all fear of the unknown? Is there any comfort in Rudyard Kipling's wise quote. "In this life I have feared many things most of which never happened"?

Like Howard's Scottish client I ardently hope the no campaign succeeds for his sake and indeed everyone else's be they property investors or not. But seriously is it not just possible that like recessions provide opportunities a yes vote might do likewise for investors? Be rightly very cautious and apprehensive now but stay on the front foot.

Neil Patterson View Profile

8:38 AM, 16th June 2014, About 8 years ago

Reply to the comment left by "Richard Adams" at "15/06/2014 - 14:56":

Hi Richard,

Yes you are correct that financial uncertainty and recession can provide opportunities if you have capital to invest.

If you already have a portfolio to protect, and need finance secured against it, there are more concerns as nobody knows what will happen with the currency, economy or banking in the event of a Yes vote. This is why you have received no straight answers.

Fear and Optimism are actual economic factors that influence markets, so do need to be taken into consideration.

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