If you are looking to buy a property in the East Midlands, you might want to think again.
A new study by Nottingham Trent University has revealed that borrowers in the East Midlands are almost four times less likely to get a mortgage than someone in London.
It found that the East Midlands, Yorkshire, North West, Wales and Northern Ireland experience “credit rationing” in relation to variable and fixed rate mortgages.
This occurs when the requirements for obtaining a mortgage exceed the capabilities of the borrower, such as large deposits of up to 40% or high interest rates.
Scotland and the West Midlands meanwhile experience “limited access” to fixed rate mortgages.
Northern Ireland experiences credit rationing despite people having a lower chance of being denied a mortgage there than in some other regions. This could be if more people are offered mortgages despite the terms of contract being prohibitive.
The research established which regions experienced credit rationing by combining the probability of being denied a mortgage with data on regional lending conditions and affordability rates.
Dr Alla Koblyakova, of the School of Architecture, Design and the Built Environment, said changes in the regulation of the mortgage market and credit rationing might have impacted different groups of households in different ways, widening the homeownership inequality gap.
“Even in a national mortgage market like the UK, where legislation doesn’t differ by region, we see regional differences in the way that lending is distributed.
“Credit rationing has the potential to exacerbate the tendency for markets to boom and bust as it causes fluctuations in the demand for mortgage debt.
“It’s important that policymakers are aware of the asymmetric response to tightening lending conditions. These findings should be considered in any forthcoming implementation of new financial regulations.”
Surprisingly, the research found that the probability of being denied a mortgage in London was much lower than elsewhere in the country where property prices are cheaper.
Koblyakova said: “All banks and building societies have their own lending strategies and we can only speculate as to why some areas receive better mortgage contracts than others.
“It could be, for instance, that the housing market in London is seen as a lower risk for lenders as property prices are less likely to fall.
“There’s also increased competition for lenders in London, meaning lenders reduce their minimum requirements in order to attract more borrowers.
“Also, as the UK’s banks are largely based in London, it’s easier for lenders to visit properties which become at risk if a borrower starts to default on mortgage repayments.”
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