25/06/2018 • news

Lendy queries bank tactics as “high-risk” mortgages soar

LENDY has questioned the strategy of lenders after it emerged that there has been a 15 per cent jump in approvals for “high-risk” mortgages.

The peer-to-peer property lender said on Monday that it makes no sense that lending to homeowners was being expanded while the provision of funds to developers dwindles.

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.

Analysis of the Bank’s data by Lendy found the number of “high risk” mortgages approved by banks jumped 15 per cent to 101,380 in 2017, up from 88,057 in 2016.

This represents 8.6 per cent of the total 1.18m mortgages taken out in the UK last year.

The 2017 figure is 48 per cent higher than five years ago in 2013, when 68,369 risky mortgages were taken out in total across the UK.

Liam Brooke, chief executive of Lendy warned that banks’ increased exposure to risky owner-occupiers has meant that even less finance is now available to property developers, which won’t help the housing shortage.

“The number of risky mortgages being handed out by banks has hit its first milestone – a 15 per cent increase in a year shows just how much more risk banks are taking on,” Brooke said.

“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.”