Think of property prices and the highest ones that come to mind will undoubtedly be in London, followed by the South East. However, as recent research by Savills has revealed, the London properties are those with the greatest loan-to-value ratios.
While property prices in other parts of the country are much lower than those in the city, and thus more affordable for many, this has thrown the LTV rates into stark contrast. Homeowners in London have enjoyed a significant increase in the value of their homes in recent years. This has led to a bigger gap between the amount of their outstanding home loans and the value of the properties they are secured on.
London comes top of the charts
The total amount of mortgage debt outstanding in the London area is currently £182 billion. The average mortgage still outstanding for homeowners in this area is £215,280. This means the average loan-to-value for an owner-occupier in London is 39%.
This compares starkly with those in the North East, where the total outstanding amount of mortgage debt is a mere £28 billion. The amount owing on the average mortgage is also considerably lower, at £79,534. However, this makes the LTV ratio considerably higher, at 60% of the value of the property. This shows how increasing property prices in the London area has been a good thing for those who already own them and are paying off mortgages on them.
The difference between the South East and Wales
The South East is the region with the second-highest LTV ratio, standing at 45%. In contrast, the area that is second from the bottom in the charts is Wales, where the ratio is 55%.
However, the contrast can be seen even more starkly with regard to specific areas. For example, Camden in London has an outstanding LTV rate of only 15%. Compare that with Burnley, where owner-occupiers have an LTV rate of 88%. This shows how different the rise in property prices has been in certain areas, and how deeply this has affected the loan-to-value rates accordingly.
A map of the results from Savills shows that most areas around London and the South East have lower loan-to-value rates attached to them. Meanwhile, in Wales and the north of England, the rates get steadily higher as you travel further north. There are pockets where the rates are slightly at odds with the general picture, but for the most part the LTV rates are correct.
The situation in Scotland
East Ayrshire has the highest LTV rate for Scotland, while Angus and the Highlands have the lowest. Not surprisingly, the City of Edinburgh also has a relatively high LTV rate for the country as a whole.
While many people will focus more on the amount they are paying for their mortgage each month, the loan-to-value element does give us a better picture of how much money each homeowner has tied up in equity. For some, the picture is definitely rosier than for others.