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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Spencer Fortag
Spencer Fortag 25 Aug 2016

The funny thing is, I mentioned the brick issue in my blog back in April: http://medwayproperty.blogspot.co.uk/2016/04/the-medway-property-market-and-lack-of.html

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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,...

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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...

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jasonevans
jasonevans 19 Aug 2016

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

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TheWaspNestRemover
TheWaspNestRemover 11 Aug 2016

You agree to pay for the treatment needed to get rid of fleas, ants, mice, wasps nests and other pests unless you can prove that these are a result of us not meeting our repairing responsibilities or these...

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madisonwelch80
madisonwelch80 02 Aug 2016

16% is quite a raise. Let's hope this tendency won't continue for long.

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madisonwelch80
madisonwelch80 02 Aug 2016

?66,963 is a serious price drop However buying a property it a serious investment only small percentage of the UK population could afford.

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madisonwelch80
madisonwelch80 02 Aug 2016

Wow, it kind of surprised me. I mean counting on mom and dad's bank even after retirement is too much. That's the moment in life when one should have ensured themselves. I am shocked.

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AbbieP.
AbbieP. 22 Jul 2016

"While house prices in the most expensive eleven boroughs have declined values in the cheapest eleven boroughs continue to rise" - not a nice way to even out the price range. London is overrated as it

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AbbieP.
AbbieP. 21 Jul 2016

And try to profit from your decisions, I may add

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CommercialTrust
CommercialTrust 19 Jul 2016

Retirement investment has always been one of the biggest draws of buy to let. And the buy-to-let demographic is, on balance, older. (Over a third of our applicants are over 50 at the time of application.) It...

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Forrest Wheatey
Forrest Wheatey 11 Jul 2016

I find the time perfect for ever home-owner wannabe. Prices should slowly, but steadily drop, at least for the inner buyer. Making it harder for outsiders to buy properties (the whole Brexit thing means...

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