The number of “high risk” mortgages approved by banks has jumped 15% in the past year to 101,380 in 2017, up from 88,057 in 2016, says Lendy, one of Europe’s largest peer-to-peer secured property lending platforms. This represents 8.6% of the total 1.18million mortgages taken out in the UK last year.

According to Bank of England guidance, mortgages are considered “high-risk” if they are lent at 4.5 times or more of the applicant’s salary.

The 2017 figure is 48% higher than five years ago in 2013, when 68,369 risky mortgages were taken out in total across the UK (see graph below).

Lendy says this shows that banks are choosing to pour more lending into the risky owner-occupier market, rather than fund new housing development.

Banks’ increased exposure to risky owner-occupiers has meant that even less finance is now available to property developers. Recent figures show that bank lending to SMEs in the property sector fell 9% last year from £13.9bn to £12.7bn*.

Lendy points out that this reduction in bank lending makes easing the UK’s housing shortage more challenging. The most recent Budget set out an ambitious target of building 300,000 new homes per year.

Liam Brooke, CEO of Lendy, comments: “The number of risky mortgages being handed out by banks has hit its first milestone – a 15% increase in a year shows just how much more risk banks are taking on.

“It makes no sense to be expanding lending to homeowners when property developers are being left out in the cold. That’s no way to solve the housing crisis – it’s something the Government will want to address if it is to meet its housebuilding targets.

“Banks’ risk models still frequently discourage lending to small and medium sized property developers – despite their appetite for lending on “high risk” mortgages to individuals clearly growing and growing.

“This is very frustrating for well-run property developers with robust, viable businesses and who are keen to maintain momentum on their project pipelines. That’s why we are seeing increasing interest in and acceptance of alternative options like peer-to-peer (P2P) lending to bridge the gap.”