A brand new evaluation by Mazars discovered that 19 of the 20 postcodes with probably the most “risky” mortgages – outlined by the Bank of England as these the place the mortgage is at the very least 4.5 instances the borrower’s earnings – have been in London.
The solely postcode exterior of London within the high 20 was Maidenhead, nonetheless throughout the London commuter belt.
In specific, South West London dominated the highest of the checklist. Wandsworth had probably the most dangerous mortgages, price a complete of £232 million, whereas Battersea was second with £198 million and Wimbledon was third, adopted by Fulham and Tooting.
The Bank of England solely permits a most of 15% of a lender’s mortgage e-book to be “risky” loans.
Mazars accomplice Paul Rouse mentioned that this implies banks and constructing societies need to make selections about the place these 15% needs to be allotted.
“Mortgage lenders have to make a very careful judgement over where they write the riskiest loans in their loan books – and they clearly see south London as a sensible place to do that,” Rouse mentioned. “Only a substantial and prolonged fall in the housing market will reveal whether that’s true.
“Hopefully the concentration of such a large amount of their lending to their most highly geared customers in an area about 20 miles wide will only get challenged by the bank’s own stress testing.
“Areas like Wandsworth, Wimbledon and Battersea should be attractive to homebuyers even in the worst market conditions. Lenders believe that makes houses there a good risk for them to take.
As interest rates rise, mortgages worth a high portion of earnings may be at the highest risk of default, meaning these London postcodes could be hit hardest in the event of a property market crash.
“With the housing market potentially facing further choppy waters in the coming months, mortgage lenders will be hoping that their loan books are well-prepared to weather some defaults,” Rouse mentioned.
