Londoners more likely to struggle with mortgages than rest of UK, says regulator

Londoners and folks residing in south-east England are 55 per cent extra more likely to battle to pay their mortgages than these residing elsewhere within the UK, new information reveals, highlighting the uneven impact of the price of residing disaster.

The Financial Conduct Authority mentioned on Friday that 5.9 per cent of the 1.8mn mortgage holders in London and the South East had been prone to being “financially stretched” by mid-2024. In accordance with the regulator, people who find themselves financially stretched have a mortgage costing them greater than 30 per cent of their gross revenue.

The findings spotlight the vulnerability of Londoners’ residing requirements to excessive housing prices. Within the newest information, median incomes within the capital are not any larger than the remainder of the nation when measured after housing prices.

The share of mortgages prone to default throughout the UK, excluding London and the South East, is 3.8 per cent, with the bottom charges within the poorest areas the place home costs have historically been decrease, together with north-east England (2.3 per cent), Northern Eire (2.4 per cent) and Scotland (2.8 per cent).

The FCA launched the figures because it finalised steerage for banks to assist at-risk debtors, together with proactively contacting them about choices to assist them keep away from default. The watchdog mentioned banks reached out to 16.5mn clients to supply assist final 12 months and expects this quantity to rise to twenty.5mn within the subsequent 12 months.

“Our analysis reveals most individuals are maintaining with mortgage repayments, however some could face difficulties,” mentioned Sheldon Mills, FCA govt director of customers and competitors, including that these apprehensive by default ought to contact their banks sooner quite than later.

The image on at-risk mortgages nationwide has improved to 356,000 from the 570,000 predicted final autumn. The FCA mentioned the 570,000 determine was primarily based on rate of interest expectations in September 2022, when the financial institution fee was forecast to peak at 5.5 per cent. Its newest information was calculated on expectations that charges would now peak at 4.5 per cent.

The FCA findings that London-based households with mortgages usually tend to be financially stretched match a variety of current surveys displaying that residing requirements within the capital are not larger than common.

Official figures present that though households in London have larger common incomes after tax than another area or nation within the UK, as soon as hire or mortgage curiosity prices are deducted, their degree of disposable revenue isn’t any larger than common.

Earnings development within the capital has additionally ceased to quickly outpace different components of the nation, and productiveness development charges have been beneath common within the UK for the reason that 2008-09 monetary disaster.

In a report final week, the Centre for Cities blamed the slowdown in London’s productivity growth for a disproportionate quantity of the general weak spot of the UK financial system for the reason that crash 15 years in the past.

The think-tank mentioned an absence of housing affordability within the capital was stopping expert individuals from shifting there, hitting the worth of output per hour labored.