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Evening Standard mortgage feature June 23

ended 16. June 2023

The Evening Standard's city desk have asked Newspage to get intel from London (and surrounds) mortgage brokers for a big feature next week on the state of the capital's mortgage market. Some questions below to get the mind whirring. We also need someone to crunch some data, so if you're good with a calculator, say so and you'll get a particularly big plug. The story will run in print and online.

  • Mortgage rates are on the up again (and then some). Are people in London with bigger mortgages and moving off 1%-2% rates more vulnerable than borrowers in other areas of the country?
  • What are you predicting for the London mortgage and property market in the second half of 2023? What are the specific challenges borrowers in the capital will face? Could there be a rise in arrears/defaults/repossessions as people struggle to manage mortgages they took out at ultra-low rates?
  • Is there a chance mortgage choice for borrowers in the capital could be lower than people around the UK as a whole, given the average property value?

Any other thoughts or insights on the current state of the London mortgage market, send them across. 

7 responses from the Newspage community

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Editor
Craig Fish
Director at Lodestone Mortgages
I wouldn't say that London borrowers are any more vulnerable than others as generally speaking property values and mortgages vs income are all relative. We have recently arranged a mortgage £2m mortgage for a client who came off 0.94% and will now be paying 4.65%. They admittedly will feel pain but are fortunate that they haven't overextended themselves so it's still affordable. Not everyone is in the same position sadly and some are considering selling. I do believe that the London property market will slow more than elsewhere though due to some affordability issues, further leading to reduced prices but this is when the property investors come out of hibernation. I don't expect the arrears position etc to be any different to the rest of the UK either and mortgage product choice will certainly not be affected in any way. Mortgage products are not location dependent.
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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
Homeowners in the capital have the largest mortgages of any section of the Uk, so when interest rates rise, they feel the pain the hardest. Rates are now predicted to peak near 6% and this would be fatal for the London market. Repossessions would rise and prices crash, but if rates peak there there will be wider economic consequences too. The government simply cannot allow this to happen. With inflation already falling, the coming 2 months will be pivotal in helping the central bank make its decision. Inflation will fall quicker than analysis to predict, and this will mean rate rises (and property price falls) won’t be as steep as many think.
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Editor
Riz Malik
Independent Financial Adviser at R3 Wealth

London residents in need of refinancing are grappling with the same hurdles faced by others nationwide, particularly if they are transitioning from historically low-interest rates to ones that could be triple or quadruple. However, due to the higher property prices leading to larger mortgage loans, these challenges might be more intense for them.
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Ross Boyd
CEO at Dashly.com
We must not cause panic and need to bear in mind that the majority of mortgages are on fixed rates so the important thing to consider is when does this fixed rate expire. Mortgages in London tend to be higher which means that mortgage loan sizes are higher. A 1-2% rate hike will have a bigger impact on £500k mortgage than one of £100k – but to be approved for a higher loan, incomes would be higher. All lenders have strict affordability rules and would have stress tested borrowing against potential rate hikes.
Inflation figures on 21st June will have a huge impact. If the Government can get inflation below 5% then that impacts positively on all aspects. Every lender has a duty of care to borrowers and the best advice if you are experiencing difficulties is to contact the lenders who have a number of solutions to help through difficult times.Mortgage choice in the capital could be higher than the rest of the country. A number of lenders offer schemes geared specifically for higher loans
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Gary Bush
Financial Adviser at MortgageShop.com
Clients we have in London who are coming off an all-time low fixed rate of 1% - 2% in the next few months and living in vastly more expensive properties than the rest of the country and therefore with very sizable mortgages are going to have to live through a perfect storm sadly. It's very much crunch time unless inflation continues to decrease and the Bank of England can rest on any base rate increases for the next 2 monetary committee meetings. If the mortgage rate crisis does continue I can see the London market cooling however on the flip side of this will be the potential for more of the much needed higher quality property stock coming to market from over-inflated mortgage account holders. It seems at the moment there is always a potential property hunter for the decent property stock on London - regardless of the mortgage interest rates. There are literally hundreds of fixed mortgage rate removals taking effect today/over the weekend and being replaced early next week.
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Samuel Ewen
Managing Director at Rosehill Financial Services
Relatively high prices don’t always mean larger mortgages, as equity may be higher. However, we tend to see higher borrowing overall in London. Larger mortgage amounts will of course see a relatively large increase. While you’d typically need a higher income to obtain a larger mortgage, there’s also the cost of living differences to take into account.

As a very basic example, Person A has a property in London worth £750,000. Person B has a property elsewhere in the UK worth £250,000. Both have 25% equity and a 25-year term on a repayment basis. Their interest rates are changing from 1.5% to 5.5%. Person A’s mortgage would increase from £2,249.64 to £3,454.24 (£1,204.60 increase). Person B’s mortgage would increase from £749.88 to £1,151.41 (£401.53 increase). Spending an extra £400pm is likely tough enough for most.

The impact on the property market is anyone’s guess. We're still seeing lots of buyers, but increased mortgage costs may force sales. It'll be an interesting year ahead.
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Ashley Thomas
Director at Magni Finance
Although people in London will be hit the hardest with large increases in their mortgages, they do have higher incomes. If anything, they might be less vulnerable as they potentially have a higher surplus of income compared to some across the country. Generally, you have to be a higher earner to get onto the property market in London as the prices are much higher.

Londoners can have less choice with mortgage options at a higher level with a low deposit with retail banks as a lot cap at a certain level. However, for those who are High Net Worth, if they want to borrow above £1m, they open up the availability of private banks and have a lot more options. They can also consider a lot more complex scenarios. As a large loan specialist, we have several contacts with private banks, some most people haven't heard of as they are more discreet.