Will regionalised lending rear its head?

The Guardian recently published an article suggesting that a huge volume of borrowers are in trouble. According to the newspaper, the banks’ loan to value requirements are increasingly causing problems; borrowers who took on debt in the halcyon days now don’t have the equity required to remortgage.

These issues are a national phenomenon, and no area is immune from them. However, the problem is far more acute where unemployment has risen or will rise in the coming months. With homeowners selling in a hurry once they are made redundant or hanging on until they are repossessed, this will have a big impact on home values. The additional lack of demand will further drive down values in these affected areas.

Not all of the UK will be affected by the cutbacks: and with employment in London looking solid, the economy recovering and its City engine room back on track, Londoners and those in its commuter belt should remain cautiously optimistic.

This will drive house prices upwards, and we’re already seeing that effect in London. Sales of prime and super prime property have been strong, as have those in and around the 3% stamp bracket. With Northern Rock rejoining the 90% market, things are looking up for first-time buyers too – but only those with the income to buy, and this is where London is strong.

The recent changes in banking remuneration with a bias to base salary have meant that the London market remains buoyant. Values are rising and demand is there. There are no real new housing developments, and as such supply is limited: simple economics dictates that house prices will continue upwards in a key area with strong employment.

How will a lender deal with this regional divide, though? Will we see a reverse of the changes affecting the market at the height of the crunch, where lenders were limiting loan to values based on your employment? Bankers saw Loan to values limited to 65% in some cases, for example.

My view is that we will see this factored into the market in the coming years. Lenders will need to be more flexible in their assessments of mortgage application as values fluctuate and they seek to balance their own risk profiles. Lending safely to clients in solid employment and owning property in areas of the UK where values are consistently strong may just make sense.

So, if you’re not in the right area or the right job, will things be impossible? Of course not; but conditions will certainly be different.

At Welbeck, we’re experts in the mortgage market: so whatever lies ahead, and whichever side of the great divide you find yourself on, we can probably help you get the mortgage that’s right for you. Contact us today to arrange a meeting.