Homebuyers in London and the West Midlands are the most reliant on mortgages, which makes them the most sensitive to interest rate rises, according to data from Sirius Property Finance.
The real estate debt advisory firm says the high cost of purchasing a property in the capital means that 76% of buyers used a mortgage, while 69% of purchasers in the West Midlands used this type of home loan, making the region the second-highest mortgage buyer in the country.
Across the UK, 67% of all house transactions completed since March 2020 have used a mortgage.
The advisory firm looked at house sales data from March 2020 when the Bank of England lowered interest rates to 0.1% at the start of the pandemic, to last month when they were raised to 0.25%, as energy and other consumer prices rose at their fastest pace in ten years.
It says: “House price growth could stutter should monthly interest payments start to climb as a result of the latest interest rates increase.”
House prices in the UK shot up by 9.8% in December 2021 on an annual basis, leaving the average UK property price at a record £276,091, according to the latest data from Halifax.
Sirius adds that London also accounts for the top three areas for mortgage property purchases.
Barking and Dagenham ranks top, where 85% of all property purchases since March 2020 were made by mortgage-funded homebuyers, followed by Waltham Forest, 84%, and Lewisham, 83%.
By contrast, homebuyers in the South West were the least reliant on mortgage lending where just 60% of purchases were completed with the help of a mortgage, followed by the North East, 63%, and Wales, 64%.
Sirius Property Finance managing director Nicholas Christofi says: “House prices have never been higher and so it’s hardly surprising that the majority of homebuyers require a financial helping hand in the form of a mortgage when looking to purchase a property.
“On average, these homebuyers will pay around 9% more than their cash funded counterparts and so it’s these buyers who have generally helped drive the heightened levels of house price growth seen over the last year or two.
“However, the areas of the housing market where mortgage funded buyers account for the largest proportion of activity are also those most susceptible to a drop in momentum should mortgage rates start to climb.
“While an increase in monthly mortgage repayment costs is unlikely to deter our appetite for homeownership completely, it will certainly see many reevaluate the total sum they are willing to borrow and therefore the price they are willing to pay for a property.
“The good news is that the cost of borrowing remains very favourable despite the Bank of England’s decision to increase the base rate during the later stages of last year and, for the time being at least, those purchasing with the aid of a mortgage are still in a very strong position.”
