Value of mortgage write-offs reaches 12-year low
The value of mortgage write-offs by banks and building societies has reached a 12-year low, falling by 79 per cent, according to latest Bank of England data.
Between 2016 and 2017, only £72m of residential loans was written off, a drop from the £348m written off in the 2015 to 2016 period and the almost £1bn written off between 2008 and 2009.
Peer-to-peer lending platform Lendy said the fall is down to a robust property market and a positive default record. It added that the large amounts of equity held within the average residential mortgage have meant lenders have been able to recover more funds where defaults take place.
Lendy did however state that property investors must be careful about 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 minimising risk, it said, and this should also be part of a well-diversified investment portfolio including equities, bonds and cash.
The secured lending platform said mortgage repayments could become more difficult for property investors as interest rates begin to rise again.
“Low interest rates have meant that bad debt in the residential market is close to all-time lows,” Lendy Co-Founder Liam Brooke said.
“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.”
