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Value of mortgage write-offs lowest since credit crunch

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  • 11/12/2017
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Value of mortgage write-offs lowest since credit crunch
The value of mortgage write-offs by banks and building societies in the last year has fallen 79% - reaching a 12-year low, according to Bank of England (BoE) data.

This fall is largely owing to a robust property market and positive default record, said peer-to-peer lending platform Lendy.

BoE data showed that between 2016 and 2017, only £72m of residential loans was written off – a marked drop from the £348m written off in the 2015 to 2016 period – and a staggering difference from the almost £1bn written off between 2008 and 2009.

Lendy said the falling value of residential loan defaults reflected the current, relative stability of the UK property market – despite Brexit related uncertainties.

It added that the large amounts of equity held within the average residential mortgage have also allowed lenders to recover more funds where defaults do take place.

 

Exercise caution

However, the property platform also said that investors need to exercise caution over exposure levels in case of a downturn in the property market, and so accommodate for a climate of rising interest rates.

“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.

“However, investors can’t afford to take their eye off the ball now that rates are starting to be pushed back up. Property will remain a sound investment, but portfolio risk must be managed effectively,” he said.

In November, the BoE raised base rates by 0.25% to 0.5%, and said that it expected two further rises of 0.25% over the next two years.

Brooke continued: “Spreading risk across multiple properties and ensuring that loan-to-value ratios are sensible are vital safeguards. Traditional property investing via buy-to-let forces investors to put all their eggs in one basket,” he added.

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