Mortgage prisoner numbers fall sharply

Ryan Fowler

November 3, 2014

In September, just 5% of mortgaged households would be unable to pass tighter lending criteria, down from 9% a year ago.

In the last year, just over 400,000 out of the total 10.8 million mortgaged UK households have found themselves no longer to be mortgage prisoners and as a result have been able to cut their mortgage payments.

In London and the South East, less than 0.1% of households now find themselves in a position where they do not have sufficient equity to remortgage.

Post 2008, tighter lending criteria has required remortgaging households to hold more equity.

In areas of the country where house prices remain significantly below 2007 levels, households who took out 95% or even 90% LTV mortgages between 2004 and 2011 will still find themselves in a position where they cannot remortgage.

These are mortgages which are now secured on a more expensive Standard Variable Rate, held by households which have not been able to take advantage of increasingly attractive fixed rate mortgage deals.

Those households which have been able to remortgage have been able to take advantage of substantially lower interest rates.

A remortgaging household in 2014 saw their monthly payments fall by an average of £115 per month, equivalent to 12% of the total monthly mortgage payment.

The average remortgaging household secured an interest rate 1.1% below their existing deal, while households coming off longer fixed rate mortgages saw their mortgage payment fall considerably more.

Nigel Stockton, financial services director, Countrywide, said: “A fall in the number of mortgage prisoners has allowed more households to substantially reduce their outgoings.

“This fall has been driven by both rising house prices but also improved access to credit from lenders.

“While a lender typically required a household looking to remortgage to hold equity of at least 15% immediately after 2008, since the latter part of 2013 we’ve seen this figure fall to 10%.

“This has allowed a growing number of households, particularly in areas of the Midlands and the North, to cut their mortgage payments.”

“While the Bank of England is right to monitor closely those households taking on a large amount of mortgage debt in London and the South East, much of this new lending is secured at substantially lower rates than mortgage debt further north.

“Many of these households have been unable to remortgage since 2007. These households look particularly vulnerable to any increase in interest rates and are more likely to feel the impact of a rate rise immediately.”

Once among some of the cheapest areas of the country, England’s inner cities have been transformed over the past 20 years and have seen house prices begin to catch up with their more suburban counterparts.

Between 1995 and 2014, three postcode districts have made the transition from falling into the cheapest 15% of areas to the most expensive 15%.

20 years ago, Herne Hill (SW24), Hove (BN3) and Willesden (NW10) suffered from high levels of deprivation and fell into the cheapest 15% of areas in the country.

By 2014, all three areas find themselves in the 15% most expensive postcodes.

Between 1995 and 2014, three quarters of inner city postcode districts saw prices rise more quickly than the national average.

While inner city London postcodes dominate, other areas, particularly Victorian inner city districts closest to the city centre have experienced a similar effect.

Over the past 20 years Didsbury (M20), Hove (BN3) and Chapeltown (LS7) have all seen prices grow at twice the national average.

The emergence of London as a leading global financial centre means that postcode districts in the Capital make up the 37 most expensive in England, compared to just the top seven in 1995. Esher (KT10) is now the highest ranked non-London postcode, the 38th most expensive.

However, among the 10 most expensive areas there has been less change, with 8 of the 10 most expensive areas in 2014 already being inside the top 100 in 1995. Notting Hill (W11) and Chelsea (SW3) are the only new entrants and reflect both the spread of Prime Central London and wholesale change of demographics within an area over a relatively short period of time.

Paul Creffield, managing director of London and Premier, Countrywide, said: “Over the past 20 years we have seen many inner city areas transformed from being among the least desirable areas to some of the most expensive. Even a decade ago, someone looking to start a family in Hackney, Didsbury or Hove would have moved out to more suburban areas.

“Improving inner city schools, falling crime rates and the conversion of derelict industrial buildings into homes have served to stem this outward drift, resulting in the creation of more balanced, less transitory communities.

“The fringes of the most expensive areas in London are now increasingly being considered prime. In a reversal of the 1970s and 1980s, house prices in areas such as, Notting Hill and Fulham, have risen much faster than in garden suburbs such as, Clapham and Ealing, which had previously been among the most sought after areas in the Capital.”

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