|"The average mortgage loan in London is 72 per cent of the value of the home"|
Loans for homes worth over a million pounds are on the rise.
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Years of continued high house price growth has meant that even wealthier buyers are feeling the pinch when buying a home. An increasingly larger number of wealthy buyers now use a mortgage to buy a home worth a million pounds or more in the capital. In 2015, 58 per cent of homes worth over £1 million in London were bought with a mortgage – the highest proportion in 10 years.
In the years preceding the financial crash, the proportion of £1million plus homes bought with a mortgage was declining but since then that trend has reversed. The proportion has increased by 87 per cent in the last 6 years alone.
What is striking is that the growth in million pound mortgages is more marked within the £1‐2 million bracket than in homes above that. 55 per cent of homes worth £1‐2 million were bought using a mortgage, a 140 per cent increase since 2008, while 30 per cent of homes worth £2‐5 million were bought using a mortgage, a 36 per cent increase. At the top end, homes worth £5 million plus, only 9 per cent were bought using a mortgage; a 29% increase from 2008.
This reflects the changing landscape of house prices in the capital where prices have grown by 68 per cent in the same period. A million pounds now buys much less than it used to so increasingly, in the more expensive parts of the capital, a million pound home is likely to be a normal family home rather than a mansion.
However, their mortgage behaviour is different to the average buyer in the capital. Those buying a £1‐2 million home on average borrow a smaller proportion relative to the value of the home than the average buyer would. The average mortgage loan in London is 72 per cent of the value of the home while the average £1‐2 million home buyer with a mortgage borrows 40 per cent of the value of their home. A relatively small amount, but still a loan worth more than the price of an average property everywhere in the country except London.
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