Londoners are more likely to struggle with mortgages than the rest of the UK, according to the regulator

New data shows that Londoners and people living in the south-east of England are 55 per cent more likely to be struggling to pay their mortgages than people living elsewhere in the UK, underscoring the uneven impact of the cost of living crisis.

The Financial Conduct Authority said on Friday that 5.9 per cent of the 1.8 million mortgage holders in London and the South East were at risk of being “financially overwhelmed” by mid-2024. According to the regulator, people who are financially strained have a mortgage that costs them more than 30 percent of their gross income.

The results underscore the vulnerability of Londoners’ living standards to high housing costs. According to the latest data, median incomes in the capital are no higher than in the rest of the country, measured by the cost of housing.

The proportion of non-performing mortgages in the UK, excluding London and the South East, is 3.8 per cent, with the lowest rates being in the poorest regions where house prices have traditionally been lower, including North East England (2.3 per cent). , Northern Ireland (2.4 percent) and Scotland (2.8 percent).

The FCA released the numbers as it finalized guidance for banks to help vulnerable borrowers, including proactively reaching out to them about options to avoid defaults. The watchdog said banks reached out to 16.5 million customers last year to offer support and expects that number to rise to 20.5 million over the next 12 months.

“Our research shows that most people are keeping up with mortgage repayments, but some might run into difficulties,” said Sheldon Mills, FCA executive director for consumer and competition, adding that those who worry by default are more likely to worry sooner when their banks were later to contact them.

The picture for at-risk mortgages nationwide has improved to 356,000 from 570,000 forecast last fall. The FCA said the figure of 570,000 was based on interest rate expectations in September 2022, when the policy rate was expected to peak at 5.5 percent. The latest data was calculated on the basis of expectations that interest rates would now peak at 4.5 percent.

The FCA’s findings that London-based households with mortgages are more likely to be financially overwhelmed are consistent with a number of recent surveys showing that living standards in the capital are no longer above average.

Official figures show that while London households have a higher average after-tax income than any other region or nation in the UK, their disposable income after paying for rent or mortgage interest costs is no higher than average.

Income growth in the capital has also slowed to outperform other parts of the country, and productivity growth rates have been below average in the UK since the 2008/09 financial crisis.

In a report last week, the Center for Cities blamed slowing productivity growth in London for a disproportionate share of the UK economy’s overall weakness since the crash 15 years ago.

The think tank said a lack of affordable housing in the capital is preventing skilled people from moving there, threatening the value of output per hour worked.