• Only 2% increase in risky loans in Scotland – UK sees 23% rise
• Developers need more funding to ease risky mortgage surge

Scotland has avoided the UK’s risky mortgage frenzy, says Lendy, Europe’s leading peer to peer secured lending platform.

Scotland took out only 2% more risky mortgages last year than it did in 2011*, rising to 1,466 from 1,443, whilst the all-UK total rose from 57,782 to 71,273 in the same period – a 23% jump.

According to the Bank of England, high-risk mortgages are those lent at 4.5 times or more than salary. People taking out risky mortgages face repossession of their homes or even insolvency should they not be able to make repayments.

Lendy says that the UK needs to build more homes if it is to slow risky mortgage borrowing. However, a lack of available funding for housebuilders has resulted in a shortage of new homes, meaning purchasers are over-extending finances to compete for the limited stock available.

Homebuyers in Falkirk and Kirkcaldy, both within 30 miles of Edinburgh, made some of the biggest cuts to the number of risky mortgages. Out of 115 UK regions, Falkirk had the UK’s second largest drop in high-risk mortgages, and those in Kirkcaldy saw a 30% fall – the 9th largest reduction in the UK.

Lendy adds that homebuyers in Aberdeen have also noticeably tightened their belts since the oil price crash as disposable income growth slows. The number of risky mortgages taken out in Aberdeen dropped to 391 in 2015, down from 437 in 2014.

Lendy adds that purchasers in the South East have seen dramatic increases in high-risk mortgages since 2011, as many over-extend themselves to keep up with rising house prices. In South East London, for example, risky mortgages have doubled, rising to 2,631 last year, up from 1,286 in 2011.

Liam Brooke, Co-Founder of Lendy Ltd: “Scotland’s homebuyers have recognised the dangers of risky borrowing.”

“It’s almost stereotyping to say that the Scottish have a reputation for prudent finances, but these figures show that homebuyers north of the border are significantly less likely to overstretch themselves when taking out a mortgage.”

“Housing shortages mean that homebuyers in the UK as a whole, however, are getting more and more overstretched every year.”

“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.”

Lendy also adds that as well as sensible financial planning by Scots, there are other drivers for the slowing in the growth of risky mortgages in Scotland.

The slowdown in the oil industry could have caused more people to be circumspect as to what financial commitments they are willing to make. There are also concerns that banks are becoming less willing to lend to Scotland and Northern Ireland.

Lendy points out that Belfast saw the largest cut (57%) in the number of high-risk mortgages taken out since 2011.

*Year end Dec 31 2015, latest possible data available