London postcodes make up 19 of the top 20 UK areas for ‘risky’ mortgages written in the past year*, shows new research by Mazars, the international audit, tax and advisory firm.
Lenders wrote £30.6bn in high-risk mortgages – those worth 4.5 times or more the borrower’s earnings – to homebuyers in the UK last year. £6.8bn total of that came in London postcodes alone. The only postcode in the Top 20 not in London was Maidenhead (SL6).
Wandsworth (SW18 postcode) was the area with the highest value of new risky mortgages written in the past year, at £232m*. All of the top 5 areas were in southwest London, with Wandsworth being followed by Battersea (SW11), Wimbledon (SW19), Fulham (SW6) and Tooting (SW17) – see table below.
Mazars says that the figures may raise concerns that mortgage lenders may be concentrating too much of their risk within a small geographic area. Rising interest rates and inflation squeezing household finances, there is a risk of a jump in mortgage arrears and ultimately repossessions. These would likely disproportionately affect these ‘riskiest’ borrowers.
Lenders, on the other hand, believe that properties in south west and south east London are likely to remain saleable even if, in the worst-case scenario, they were forced to repossess them. Paul Rouse, Partner, of Mazar says that demand for properties in these areas is likely to be less affected than many others during a recession.
Paul Rouse, Partner at Mazars says: “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. Only a substantial and prolonged fall in the housing market will reveal whether that’s true.”
“Hopefully the concentration 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.”
“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.”
Top 20 postcodes with highest value of risky mortgages written in the year to March 2023
*year-end March 31 2023.Source: Financial Conduct Authority
