Londoners and people living in the South East of England are 55% more likely to struggle to pay their mortgages than those living elsewhere in the UK, data shows, highlighting the uneven effect of the crisis of the cost of living.
THE Financial Conduct Authority said on Friday that 5.9% of the 1.8 million mortgage holders in London and the South East were at risk of being “financially strained” by mid-2024. According to the regulator, people in financial difficulty have mortgages that cost them more than 30% of their gross income.
The results highlight the vulnerability of Londoners’ standard of living to high housing costs. According to the data, median incomes in the capital are no higher than in the rest of the country when measured after housing costs.
The sharing of mortgages default risk in the UK excluding London and the South East is 3.8%, with the lowest rates in poorer regions where house prices have traditionally been lower, notably the North East of England (2.3%), Northern Ireland (2.4%) and Scotland (2.8%).
The FCA released the figures as it finalized guidance for banks to support at-risk borrowers, including proactively contacting them about options to help them avoid default. The watchdog said banks contacted 16.5 million customers to offer assistance last year and expects that number to rise to 20.5 million over the next 12 months.
“Our research shows that most people keep pace with mortgage repayments, but some may struggle,” said Sheldon Mills, FCA’s executive director of consumer and competition, adding that those worried about default should contact their bank as soon as possible.
The national subprime mortgage chart improved to 356,000 from 570,000 expected last fall. The FCA said the 570,000 figure was based on interest rate expectations in September 2022, when the bank rate is expected to peak at 5.5%. Its data was calculated on expectations that rates would now peak at 4.5%.
The FCA’s findings that London-based households with mortgages are more likely to be financially strained match a series of recent surveys showing living standards in the capital are no longer above average.
Official figures show that although London households have a higher average after-tax income than any other region or nation in the UK, once rent or mortgage interest charges are deducted, their level of disposable income does not is not above average.
Income growth in the capital has also stopped rapidly outpacing other parts of the country, and productivity growth rates have been below average in the UK since the 2008-09 financial crisis.
In a report released last week, the Center for Cities blamed the slowing productivity growth in London for a disproportionate share of the overall weakness in the UK economy since the crash 15 years ago.
The think tank said the lack of affordable housing in the capital was preventing qualified people from settling there, which was hitting the value of output per hour worked.