Belfast areas face subprime risk

TWO PARTS of Belfast have emerged as being among the areas at highest risk in the UK for exposure to subprime debts.

Research conducted by credit ratings agency Experian found that west Belfast and north Belfast featured in the top 30 of a list of 646 areas in the UK for being likely targets for subprime lenders.

West Belfast is 10th on the list, with a subprime "penetration" of almost 60 per cent, meaning 18,360 households are at risk.

North Belfast is 28th, with a 51.74 per cent penetration rate, or with 17,601 households at risk.

The research, published in the Spectatormagazine, is designed to identify households "on the edge", or those susceptible to default in a weaker economy.

Experian did not collate the number of subprime borrowers in the 646 areas but, rather, judged where people matching the subprime profile were likely to live.

The agency pointed out that a classic subprime candidate was not somebody receiving social welfare but a candidate likely to have incurred a credit default some years ago before re-entering steady employment. Their impaired credit history will prevent them accessing borrowings in the mainstream lending market.

Research by UK personal finance website Moneyfacts shows that 12 lenders offer subprime products in the North and 879 products are available. This illustrates the popularity of the subprime model in the UK as a whole.

Subprime loans are best known in the mortgage market, where they allow borrowers to access credit that would not have been open to them otherwise. In return for the funds, the borrower pays a higher rate of interest than would be levied on the equivalent borrowings from the mainstream market.

This higher cost leaves the borrower more vulnerable to default in the event of a downturn.

There are already hints that weaker conditions are being felt in the North, with house repossession court actions up by 40 per cent in the past six months.

The North's housing market has boomed over the past few years, although growth has eased in recent months.

Research from the University of Ulster and Bank of Ireland shows that the average price of a house in the North at the end of 2007 was £230,000 (€292,000), down from a peak of £250,000 last summer. Still, the average house rose 26.4 per cent in value over the course of last year.

At the end of 2007, the average price of a house in the Republic was €287,887.

Among the other areas in Experian's subprime list are Foyle at 121st position, east Belfast at 186th and west Tyrone at 253rd. South Belfast is 299th, Strangford is 322nd and Lagan Valley is 328th.