Since the cap on bonuses was lifted last year, some individuals are likely to have received significant lump sums very recently – bonuses are generally expected to amount to between 40 and 100 per cent of bankers’ already generous annual salaries. Moreover, it’s said that employers are opting to pay higher bonuses rather than increase salaries in the current cost of living crisis, so this years’ bonuses are likely to be higher than last year’s. Bonuses have traditionally been linked to rising property prices at the upper end of the scale in London – but is this still the case?
As we all know, the property market is currently reacting to the significant increase in interest rates over the past few months. It’s a turbulent time, and traditional truths don’t necessarily hold weight right now. While property prices in London are holding up – they are in fact slightly up on the same time last year (by 0.7%) – the average property in the capital has depreciated by 2.3% in the last month, and is now valued at £672,961, according to Rightmove’s figures. August is usually a relatively quiet month as many people are on holiday, but buyers are also concerned with inflation and the highest base rate since 2008 – plus, it’s important to note that average prices are still 19% higher in London than they were in August 2019.
So what will bankers do with their extra cash? Arranging a mortgage can be complex when a large proportion of income comes from a bonus. Most lenders generally like to see certainty of income rather than variable pay, though when large sums are at stake there should be no difficulty in finding a specialist lender who has an arrangement for bonus income. Some bonus income comes in the form of restricted stock, and this can be considered as income by lenders used to dealing with City professionals.
The London boroughs most affected by bankers’ bonuses in the past have been Kensington and Chelsea, Hammersmith and Fulham and Wandsworth, where prices have risen steeply over the last 20 years. A significant amount of bonus money also goes into home improvements including extensions, basements and refurbishments, because the housing market in London is still seen as an excellent long-term investment, whatever current storms it may be weathering.