• 16.5% all mortgages taken out in Croydon are high-risk…
• …double the whole of the UK, which is at 8.1%
• Croydon’s unexpected renaissance to blame

Croydon has seen the biggest boom in high-risk mortgage lending in the UK, with 419 new risky mortgages taken out by homeowners in the town in 2016 alone, according to new research by Lendy, Europe’s leading peer to peer secured lending platform and new title sponsor of Lendy Cowes Week.

Lendy says Croydon saw a 35.6% rise in the number of high-risk mortgages taken out in 2016, from 309 in 2015 – the largest number anywhere in the UK. Bank of England guidance says mortgages are considered ‘high-risk’ if they are lent at 4.5 times the applicant’s salary or above.

Across the UK, high-risk mortgages made up 8.1% of all mortgages in the last year, with 88,057 of 1,088,908 mortgages considered high-risk. The percentage of high-risk mortgages taken out in Croydon was more than double this, with 16.5% considered high-risk in 2016.

Lendy says that the number of high-risk mortgages in Croydon has risen sharply as the town continues its unexpected renaissance, establishing itself as a leading hub for technology companies.  Croydon’s revival is rapidly driving up house prices in the area and causing buyers to stretch themselves further.

Lendy says that increased levels of high-risk mortgage lending to the owner-occupier market comes at a cost to the housing market overall. Lack of lending to developers and the resulting housing shortage means that homebuyers in the UK as a whole are getting more and more overstretched every year.

Liam Brooke, Co-Founder of Lendy, comments: “Croydon has reinvented itself as an up-and-coming business and technology hotspot with all the trappings of success like fintech companies and the Boxpark. Homebuyers are now really stretching themselves to live there.”

“Investment in the town has improved transport connections and opened Croydon up for growth, as its proximity to Gatwick and London allow easy links to international and European trade markets.”

“However, bank lending to property developers has fallen, and it is the smaller housebuilders being hit hardest. As a result, we are seeing more and more of them look for alternative ways of funding their projects, such as peer-to-peer finance.”

The rapid growth of house prices in areas like Croydon means that those looking to invest in property may benefit from choosing to lend against properties with lower LTVs rather than investing directly in equity.

Lendy says that lower LTVs play a big role in ensuring that risk is reduced for their investors. Lendy offers LTVs of 70% or below on all its properties – which means that risk can be managed for those lending through its platform.

Investors can also lower the risk involved in the property market by diversifying their exposure. Peer-to-peer platforms like Lendy allow individuals to access different types of property and risk/return profiles, resulting in a broader mix of relatively higher yields and medium yields.

Liam Brooke continues: “Peer-to-peer lending may be a good option for investors keen to access the returns the market offers without risking too much. Limited LTVs and holding a first charge over a property provide insulation from risk that direct property investment cannot offer.”

Lendy says that other areas with large numbers of high-risk mortgages included Walthamstow in East London, with 371 lent in 2016, and Wandsworth, with 330. Six of the top ten high-risk mortgage postcodes are in South West London.