A new report has used Understanding Society/BHPS data to analyse regional variations in mortgage choice decisions within the UK’s mortgage sector.
The report, Regional Differences in Mortgage Demand and Mortgage Instrument Choice in the UK, was released this week by Alla Koblyakova, of the School of Architecture, Design and the Built Environment at Nottingham Trent University.
Utilizing British Household Panel Survey (BHPS) data for the years 2001, 2007 and 2008, the paper suggests that a household’s decision to choose a variable rate mortgage is more likely to occur in areas with lower incomes and affordability rates, such as Northern England, Scotland and Wales.
The study of 1,000 mortgage holders suggested that those in the north of England had a 78% likelihood of holding a variable-rate mortgage, compared with 35% in the south of England.
The research comes as the Council of Mortgage Lenders (CML) revealed a clear north/south divide in terms of mortgage debt, with those in the north actually having far less in outstanding loans than their southern counterparts.
These findings add weight to the debate over interest rates by revealing a ‘geographical imbalance’ in the way that mortgages are distributed in the UK. This has important messages for policy makers, says Ms Koblyakova:
“As variable-rate mortgages are more sensitive to financial shocks, it is a matter of national economic concern that there is such a geographical imbalance in the way that mortgages are distributed in the UK.
“It is very important that policymakers are fully aware of this when considering future monetary policy decisions, as an increase in interest rates is likely to affect poorer regions much more severely than others.”
- BBC News: North-South divide in mortgage risk, says academic
- Moneyfacts: The north/south divide in mortgage debt
- Where now to financial inclusion?
- Real families change behaviour when under economic pressure
- Download Understanding Society data
this news has been re-posted from the Understanding Society website