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.”

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MBM Homelets
MBM Homelets 23 Mar 2017

Although this is a very positive step, there is little or no guarantee of the standard of workmanship employed by the tenants. We have had experience of a professionally decorated property being ' painted'...

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ajay
ajay 21 Mar 2017

How is the "robust evidence" looking now?

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NathanG 20 Mar 2017

I've been watching the series so far and am completely baffled by the cases that were presented. Though, I don't think that we can protect ourselves from every scam possible - it will just make the scammers...

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You would think so Niraj Shah! My experience only proves that there are varying qualitiers of professional in all aspects of property letting. None of the ones I have dealt with, from letting agents to...

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Mark
Mark 01 Mar 2017

Thanks for this article. Hopefully one day everybody's lifestyle will be eco-sustainable.

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Ben Taylor
Ben Taylor 28 Feb 2017

I was convinced that London was the most expensive!

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Alan Read
Alan Read 28 Feb 2017

Australia are leading the way in this I think. The trouble with Britain is we don't get enough sun to make use of solar power.

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James Powell
James Powell 27 Feb 2017

This is a very good news.

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DanHumphreys
DanHumphreys 27 Feb 2017

It sounds like a good idea. Anything to help the younger generation get a foothold.

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Matt
Matt 20 Feb 2017

Is this fake news?

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Matthew Hollywood 07 Feb 2017

Matthew Hollywood - Director Mishon Mackay Land & New Homes - Brighton The shortage of New Homes is in part effected by the lack of land sales. Land sales are held back because there is a disparity between...

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CommercialTrust 30 Jan 2017

Hi Graham, Would be interesting to see the above figure calculated against an investment via a Lt Company /SPV structure and if the investor found themselves pushed in to the higher tax bracket. Mortgage...

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