BofE report shows Lloyds Banking Group holds most risky mortgages
A new Financial Stability Report from the Bank of England has criticized Lloyds Banking Group for having almost twice as many high or very high risk mortgages on its books than other banks.
The report shows that about 60 percent of the £345 billion in mortgages held by Lloyds are in the high or very high risk categories, with 32 percent of the loans in the very high risk category of being worth 90 percent or more of the property mortgaged, while 13 percent of the mortgages held by Lloyds exceeding the value of the property mortgaged.
According to the report, only Royal Bank of Scotland carries anywhere near the number of high loan-to-value (LTV) ratio mortgages as Lloyds, with 27 percent of its loans in the high loan-to-value category, worth 70 percent to 90 percent of the mortgaged property’s value, while 12 percent of RBS-held mortgages in the very high loan-to-value category.
Among other big lenders, 22 percent of the mortgages held by Santander are in the high LTV category and 11 percent are in the very high LTV category, 21 percent of Nationwide’s mortgages are high LTV and 7 percent are very high LTV; 15 percent of the mortgages held by Barclays are high LTV and 6 percent are very high LTV; and 8 percent of the mortgages held by HSBC are high LTV and there in so data available on the number of very high LTV mortgages it holds.
The report from the Bank of England worries about the high percentage of mortgages held by Lloyds because research has shown that home buyers who take out very high loan-to-value loans, and who make smaller deposits on their loans, are more likely to fall behind on their payments and to default.
Research by Standard & Poor’s shows that buyers who pay a deposit of 10 percent on their homes are twice as likely to get behind in their payments than buyers who put down a deposit of 30 percent to 40 percent.
With so many mortgages in high-risk categories, Lloyds is seen more at risk for losses if the economy runs into more problems, and especially if home prices drop again, an eventuality that analysts see as likely.
Category: Mortgage News
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