London remains the most attractive area for homeowners

Newly released data from mortgage broker, Private Finance, has shown that the top 20 UK mortgage hotspots are dominated by the capital with the South West, South East and East London ranking first, second and third for the areas with the highest value of mortgage lending in the UK.

According to the findings, South West, South East and East London had a total of £38.3bn, £28.1bn and £23.8bn of mortgage lending respectively in 2020 (year-end 31 March).

The data revealed that the high levels of mortgage lending are, in part, the result of areas in SE London, such as Peckham and Bermondsey, experiencing rapidly growing interest among young professionals.

Peckham’s vibrant local hospitality and leisure industries and improved transport links to London’s central hub may have been contributing factors in attracting young professionals to the area. Rye Lane has transformed into a hub of well-regarded eateries, while the expansion of the London Overground has cut commuting times for those working in the City.

Private Finance explains elevated mortgage lending is highly concentrated in London due to property prices being much higher in the capital compared to other parts of the UK2. Higher house prices often mean prospective homeowners have to take out a larger loan to finance purchases. Younger people also make up a large proportion of buyers in the capital – this group tend to require a larger loan due to having smaller deposits.

Pandemic to trigger flight of homeowners from capital

However, the research suggests the coronavirus pandemic and resulting lockdown measures may trigger a flight of homeowners from London in future. Consumers are placing greater value on larger properties with access to green space, which are scarce in the capital.

Changing consumer preferences, driven by the rapid switch to home working and prolonged periods spent at home, are likely to result in ‘commuter’ and ‘satellite’ towns experiencing sharp increases in mortgage lending due to people relocating outside of city centres over the next year.

Longer-term trends highlight that towns on the periphery of London were already rising in popularity even before the onset of the pandemic, with some of these areas experiencing the highest rises in the value of mortgage lending over the last year*. These include:

1: St. Albans, rising 10.9% to £7.9bn in 2020, up from £7.1bn in 2019
2: Cambridge, increasing 10.8% to £8.3bn in 2020 from £7.6bn in 2019
3: Oxford, jumping 10.5% to £13.2bn in 2020 from £11.9bn in 2019

Shaun Church, Director at Private Finance said, “This data reveals that London continues to remain the most attractive area for homeowners.

“The transformation of Peckham and Bermondsey has contributed to an inflow of young professionals into SE London. High house prices and long-term demand for property in places such as Clapham have continued to support SW London’s mortgage market.

“However, shifting housing needs caused by people staying within the same four walls during long lockdown periods could cause a flight of homeowners from the capital.

“Workers are increasingly viewing being close to their physical workplace as less important due to widespread adoption of working from home practices. Fears over contracting coronavirus is putting downward pressure on demand for properties in highly populated areas.

“Rock-bottom mortgage rates may be incentivising people who have long considered relocating from cities to bring forward property purchases in the countryside to lock into cheaper mortgages.

“These factors are likely to compound and result in future activity being highly concentrated in areas just outside the UK’s major cities and the countryside. The top areas likely to experience the sharpest uptick in buyer activity and therefore mortgage lending could include Chelmsford, Chester and Reading.”