London’s million-pound homes push more buyers into mortgages

Bloomberg

More home buyers are resorting to mortgages to purchase London’s most expensive houses and apartments as rising prices drag them into higher tax brackets.
Seventy-four percent of homes costing 1 million pounds ($1.4 million) or more in the UK capital were bought with a mortgage in the three months through July, up from 65 percent a year earlier, according to Hamptons International. The figure was as low as 31 percent during the depths of the financial crisis in 2009.
“Higher stamp duty above the million-pound mark means that owners have to fork out for more tax, eating into equity they might otherwise have had to buy outright,” said Fionnuala Earley, residential research director at Hamptons.
“The rise in house prices” means that “many normal family homes in the capital now attract this value.”
Stamp-duty rates climb according to property values, with homeowners paying a levy of 43,750 pounds on a one million-pound house, according to HM Revenue and Customs figures for single property ownership. That jumps to 153,750 pounds for a 2 million-pound purchase.
The increase in the use of home loans comes amid growing concerns that a consumer-debt bubble is forming in the UK. The Bank of England warned in July about the
systemic risks caused by the boom in car loans, extended interest-free periods for credit cards and an easing of mortgage standards.
The proportion of buyers using mortgages to acquire high-priced homes rose in every UK region in the period through July. The East of England matched the nine percentage-point jump in London, while Wales registered a one percentage-point rise, the Hamptons data show.
In April, the proportion for London reached 72 percent, which was the highest single-month figure since the broker began compiling the data
in 2007.
While there are signs that growth in UK house prices is starting to slow, property values are still up an average 18 percent across the country over the past decade, with the gain in the capital at 78 percent, according to Savills Plc and Nationwide Building Society.
Sales of homes in London’s best districts rose more than
25 percent in the three
months through July from a year earlier, figures from researcher Lonres show.