Londoners and people living in the south-east of England are 55 percent more likely to have difficulty paying their mortgages than those living in other parts of the UK, data shows, highlighting the uneven effect of the cost of living crisis.
The Financial Conduct Authority said on Friday that 5.9 percent of the 1.8 million mortgage holders in London and the south-east risked being “financially distressed” by mid-2024. According to the regulator, people who are in financial distress have a mortgage that costs more than 30 percent of their gross income.
The findings highlight the vulnerability of Londoners’ living standards to high housing costs. Median income in the capital does not exceed that of the rest of the country when measured after housing costs, according to the data.
The proportion of mortgages at risk of default in the UK, excluding London and the South East, is 3.8%, with the lowest rates in the poorest regions where house prices have traditionally been lowest, including the North East England (2.3%). , Northern Ireland (2.4 percent) and Scotland (2.8 percent).
The FCA published the figures in finalizing guidance for banks to support at-risk borrowers, including proactively engaging with them about options to help them avoid default. The regulator said banks contacted 16.5mn customers to offer support last year and expects this number to rise to 20.5mn in the next 12 months.
“Our research shows that most people are keeping up with their mortgage payments, but some may face difficulties,” said Sheldon Mills, FCA’s executive director of consumer and competition, adding that those concerned about default should Contact your banks as soon as possible.
The picture for at-risk mortgages nationwide has improved to 356,000 from the 570,000 forecast last fall. The FCA said the 570,000 figure was based on interest rate expectations in September 2022, when the bank rate is forecast to peak at 5.5 percent. Its data was calculated based on expectations that rates would now peak at 4.5 percent.
The FCA’s findings that London households with mortgages are more likely to come under financial pressure are in line with a range of recent surveys showing that living standards in the capital are no longer higher than average.
Official figures show that although London households have a higher median income after tax than any other region or nation in the UK, after deducting rental costs or mortgage interest, their level of disposable income is no higher. to the middle
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 last week, the Center for Cities blamed slowing London productivity growth for a disproportionate amount of the overall weakness in the UK economy since the crash 15 years ago.
The think tank said the lack of housing affordability in the capital prevented qualified people from moving there, affecting the value of output per hour worked.