Risky mortgages rise in northern England
As risk of a no-deal Brexit increases, any squeeze on incomes could turn housing market from a slowdown into a slump
Lenders are ramping up riskier mortgage lending in the north of England just as property values start to fall and interest rates increase.
That could be bad news for banks and home-loan providers in a region that’s already facing a hit to its wealth from the UK’s withdrawal from the European Union, no matter what kind of agreement is reached. It also threatens to hurt the economy there as borrowers cut back on spending to meet rising mortgage payments.
With the risk of a no-deal Brexit increasing, any subsequent squeeze on incomes and rise in unemployment could turn the region’s housing market from a slowdown into a slump.
The north, where most people voted for Brexit, is more vulnerable than London to an economic downturn following the withdrawal because of its greater reliance on manufacturing for export.
“Brexit will be very bad news for all regions outside London, which is much more diversified and less dependent on the EU for its well-being,” said Jane Pollard, professor of economic geography at Newcastle University. “Levels of financial vulnerability will be particularly pronounced in areas like the north east; even people with quite reasonable incomes who are heavily indebted have little buffer if something goes wrong.”
Home prices fell almost 1 per cent in the north west of England in June from a month earlier, and were down 0.3 per cent in the north east and 0.5 per cent in Yorkshire and the Humber area.