New research reveals areas most affected by a rate rise

New research reveals areas most affected by a rate rise

The latest research conducted by Savills has highlighted which areas are most at risk when interest rates rise.

Savills has found that differing mortgage constraints affect different areas, looking at both outstanding loan to value mortgages as well as loan to income ratios.

While north England and Wales have higher average outstanding loan to value mortgages, London and the South East have the highest average loan to income ratios.

British mortgaged owner occupiers have an average outstanding loan to value of 48%, but this ranges from 39% in London to 60% in the North East of England - despite the fact that the total value of mortgage debt in London is more than six times higher.

Lucian Cook, head of Savills UK residential research, said: “This reflects the fact that owner occupiers in London have benefitted from strong price growth in the period post credit crunch, which has added substantially to their net housing wealth.

In contrast, residential property in the North East caries a much higher level of debt relative to the underlying value of the assets on which it is secured, due to lower longer term price growth and a much more muted performance over the last 10 years.”


This variation is even more pronounced at a local level: in Burnley the average outstanding loan to value among owner occupiers with a mortgage is 88%, while in Camden it is just 15%. Generally, the most indebted areas tend to be the least affluent urban markets of north England and Wales, though Worcester and Peterborough also rank highly. The least indebted are a combination of high value London boroughs that have seen exceptional price growth and affluent rural areas with older populations who have paid down the bulk of their mortgage debt.

The markets most exposed to rate rises are those with a combination of relatively high outstanding loan to income and high loan to value ratios. These include the likes of Newham, Crawley, Barking and Dagenham, Tower Hamlets, Harlow, Worcester, Watford, and Slough.

At the other end of the scale are the likes of West Somerset, Camden, Eden, Copeland, Richmondshire and North Norfolk where outstanding levels of debt are much less of a constraint. Kensington and Chelsea and Westminster also fall into this list, though their markets are affected much more significantly by issues such as stamp duty.

Lucian Cook added: “Loan to income ratios are more stretched in London despite the higher equity cushion. Consequently, the capital will be more constrained by mortgage market review and increased interest rate rises. This will particularly affect younger owner occupiers, who are relatively new to the market and have stretched themselves on higher loan to incomes.

On the other hand, some of the markets with the least equity are less affected by affordability constraints as they have lower loan to income multiples, but people’s ability to trade up the housing ladder may be limited by a lack of accumulated equity to put down as a deposit.”

Join our mailing list:

Leave a comment



Latest Comments

luxus
luxus 27 Sep 2016

It can be stressful. More clarity is needed on the process, from a customer perspective and consideration should be given to using the Scandinavian model where the sales process is much quicker.

view article
Melissa_Green
Melissa_Green 26 Sep 2016

Green belts are normally designated around capitals and other major cities and conurbations and their aim is to prevent urban sprawl by keeping land permanently open. The essential characteristics of green...

view article
Jimmy_McCoy
Jimmy_McCoy 16 Sep 2016

I think that the main reason to buy garden purchases in last minute is because people always search for the best deal. In summer months there are abundance of seasonal goods and it means more low cost

view article
Jimmy_McCoy
Jimmy_McCoy 16 Sep 2016

Buying a home often is more expensive than you expect. There are lots of hidden costs such as: stamp duty, surveys and valuations, mortgages etc. that can add more than 10% to the total bill

view article
Homebuyerconveyancing
Homebuyerconveyancing 15 Sep 2016

We are seeing a massive influx of Homebuyers using online Estate Agents. The winners are the online portals that still aim to manage the customer journey to homeownership. They provide a valuation service,...

view article
oliviaG
oliviaG 12 Sep 2016

Without a doubt renovating can truly be very beneficial to many homeowners but it depends to a great extent on the condition of your home and the parts of it you want to refresh. Before you start you should...

view article
oliviaG
oliviaG 29 Aug 2016

So true about cats!

view article
Jason Roberts
Jason Roberts 25 Aug 2016

Any predictions what average rent will be at the same time next year, anymore drops coming?

view article
dylanvan
dylanvan 19 Aug 2016

very good, thanks for sharing

view article
SecomTech
SecomTech 19 Aug 2016

Firstly, I either lodge with DPS or do not take a deposit...secondly, If a tenant has not received a confirmation their deposit is secured with either a scheme or in an insured account with an agent/landlord,...

view article
jasonevans
jasonevans 19 Aug 2016

Belvoir has over 15 years of experience in property lettings, buying and renting and is one of the best agencies I know about. I have heard that they revived an award for the hard work. Really amazing...

view article
jasonevans
jasonevans 19 Aug 2016

Usually these areas are least affected when it comes to unexpected economical collapse.

view article

Related stories

More articles from Property