Analysis by peer to peer secured lending platform, Lendy, has found that the number of new residential mortgages worth over £1 million went up by 24% last year, as banks continue to favour lending to owner-occupiers and reduce lending to property developers.
According to the data, the number of new £1 million-plus mortgages written by banks last year increased to 4,844, up from 3,896 in 2015. The total value of these mortgages rose 18% over the same period to £8.95 billion from £7.59 billion.
Lendy explains that regulations such as Basel III have incentivised banks to take risks in the owner-occupier market and cut exposure to property developers, with the availability of funding for developers diminishing as a result.
Recent research from Lendy found that outstanding bank lending to developers fell 7% last year, to £14.8 billion in 2016 from £16 billion in 2015.
Lendy says that too much funding to owner-occupiers just leads to house price inflation. Increased funding to developers increases the supply and moderates house price inflation.
Lendy adds that the UK’s housing crisis could worsen if banks continue to favour owner-occupiers over property developers, who build homes for more people and at faster rates than small housebuilders.
The Government’s Housing White Paper, released in February, has targeted up to 270,00 new homes every year to meet demand – only 190,000 were built last year. Lendy says that developers need more financial backing from banks to get spades in the ground to hit housing targets.
The lack of funding has led many developers to choose alternative forms of finance such as peer to peer lending to fund their projects. For example, Lendy’s loan book has increased to £171 million from just £73 million in December 2015.
