15/12/2017 • news

Mortgage write-offs fall 79% in one year

The value of residential mortgages written off by banks and building societies has dropped by 79% in the past year, according to the latest research.

Data from the Bank of England revealed that UK lenders wrote off £72m of residential loans in the year end 30^th September 2017, 79% lower than the same period in 2015/2016 – when £348m was written off – and even lower than pre-credit crunch levels.

Lendy believed that these figures were the result of a robust property market and positive default record.

The peer-to-peer lending platform claimed that the fall in value of residential loan defaults reflected the current, relative stability of the UK property market despite Brexit.

The large amount of equity held within the average residential mortgage has allowed lenders to recover more funds when defaults do take place.

However, Lendy believed that property investors must act careful with regards to the level of exposure they take on in case of a downturn in the property market.

Diversifying investments across a range of different properties is one way of decreasing risk.

Lendy highlighted that mortgage repayments could become more difficult for property investors as interest rates begin to increase again.

The value of mortgage write-offs is at the lowest level since before the credit crunch

“Low interest rates have meant that bad debt in the residential market is close to all-time lows,” said Liam Brooke, co-founder of Lendy (pictured above).

“However, investors can’t afford to take their eye off the ball now rates are starting to be pushed back up.

“Property will remain a sound investment, but portfolio risk must be managed effectively.

“Spreading risk across multiple properties and ensuring that loan-to-value ratios are sensible are vital safeguards.

“That’s where investing via P2P can help, enabling investors to diversify their property portfolios across a large number of investments with ease.

“Traditional property investing via buy-to-let forces investors to put all their eggs in one basket.”

Lendy restricts its loans to a maximum 70% LTV, and acquires independent professional valuations for every loan that is made.