UK sees 23% rise in high-risk mortgage lending

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The UK has seen a 23% jump in the number of ‘risky mortgages’ taken out, but Scotland has avoided a high-lending surge, according to peer-to-peer platform Lendy.

The Bank of England classes high-risk mortgages as those lent at 4.5 times or more than salary.

Scotland took out only 2% more risky mortgages last year than it did in 2011, rising to 1,466 from 1,443, whilst the all-UK total rose from 57,782 to 71,273 in the same period.

Homebuyers in Falkirk and Kirkcaldy, both within 30 miles of Edinburgh, made some of the biggest cuts to the number of high-risk mortgages. Out of 115 UK regions, Falkirk had the UK’s second largest drop in high-risk mortgages, and those in Kirkcaldy saw a 30% fall – the 9th largest reduction in the UK.

Lendy adds that homebuyers in Aberdeen have also noticeably tightened their belts since the oil price crash as disposable income growth slows. The number of risky mortgages taken out in Aberdeen dropped to 391 in 2015, down from 437 in 2014.

Lendy adds that purchasers in the South East have seen dramatic increases in high-risk mortgages since 2011, as many over-extend themselves to keep up with rising house prices. In South East London, for example, risky mortgages have doubled, rising to 2,631 last year, up from 1,286 in 2011.

Liam Brooke, Co-Founder of Lendy, said: “Scotland’s homebuyers have recognised the dangers of risky borrowing. It’s almost stereotyping to say that the Scottish have a reputation for prudent finances, but these figures show that homebuyers north of the border are significantly less likely to overstretch themselves when taking out a mortgage.

“Housing shortages mean that homebuyers in the UK as a whole, however, are getting more and more overstretched every year.

“Bank lending to property developers has fallen, and it is the smaller housebuilders being hit hardest. As a result, we are seeing more and more of them look for alternative ways of funding their projects, such as peer-to-peer finance.”

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