A LACK of lending to developers coupled with a boom in high-risk mortgage lending risks overstretching current homeowners, Lendy claims.

A freedom of information request to the Bank of England by the peer-to-peer property platform found high-risk mortgages – those lent at 4.5 times the applicant’s salary or above – made up 8.1 per cent of all home loans last year.

This works out as 88,057 of 1,088,908 residential mortgages lent in 2016, up 23.5 per cent on 2015.

The research identified Croydon as a hotspot for high risk lending, with a 36.6 per cent rise during 2016, the largest in the UK.

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Liam Brooke, co-founder of Lendy, warned that the increased levels of high-risk mortgage lending to the owner-occupier market comes at a cost to the housing market overall, but is an opportunity for P2P.

He warned that a lack of lending to developers and the resulting housing shortage means that home buyers in the UK as a whole are getting more and more overstretched every year as they borrow as much as they can to make do with the current supply.

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“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,” Brooke said.

“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 P2P finance.”