THE oil price crash could lead to a rise in the number of homes being repossessed in Aberdeen, experts have warned.
The city has seen a 42 per cent increase in new mortgages categorised as risky by the Bank of England since 2010 leaving homeowners vulnerable to the impact of the recent turmoil in the oil sector.
UK accountancy firm Moore Stephens said the default rate of mortgages in Aberdeen could rise quickly if redundancies in the oil and gas sector increase, leading to rising arrears and repossessions.
The warning comes after a raft of redundancies and project cancellations as a result of the fall in the price of oil.
Pay rates for contractors at oil and gas service companies have also been cut and major oil and gas companies are under pressure from shareholders to cut their workforce.
Tycoon Sir Ian Wood has already predicted job losses over the next 18 months as the company he founded, the Wood Group, announced a pay freeze and a 10 per cent cut in contractor rates.
Exploration firm ConocoPhillips is cutting 230 out of 1650 jobs in the UK and oilfield services company Schlumberger has cut back its UK-based fleet of geological survey ships.
Meanwhile, investment firm Goldman Sachs has predicted big oil firms will have to cut capital expenditure by 30 per cent to restore profitability.
Jeremy Willmont, head of restructuring and insolvency at Moore Stephens, said: "The oil price crash could drag down the housing market in Aberdeen. If mortgage failures lead to a drop in house prices a considerable number of people could suddenly find themselves in negative equity.
"Disposable incomes have risen more in Aberdeen over the past five years than anywhere else in the UK, thanks to a combination of low interest rates and high oil prices, but this may not be the case for much longer.
"The oil price fall has already had a negative impact on the employment prospects for some of those working in the oil industry. Second line consequences for the housing market and service industries in areas particularly affected may now start to emerge."
Mr Willmont said it was possible the price of oil remained low in the medium term with even starker consequences if interest rates start to rise.
He added: "This will be unwelcome news for mortgage lenders too. The fall in the oil price came as a surprise to most people, but banks will not want to be linked to risky property loans, whatever the underlying cause."
In the years of the oil boom the average house price in Aberdeen rose sharply, catching up with the average price of properties in Edinburgh and increasing by 9.8 per cent in the last year alone.
Moore Stephens said future house price growth in Aberdeen had been predicted encouraging purchasers to take on bigger mortgages at higher percentages of their income.
The firm said the number of new risky mortgages across Scotland increased by two per cent since 2010 compared to a 42 per cent increase for Aberdeen. Risky mortgages in Edinburgh were up nine per cent in the same period and up ten per cent in Glasgow.
The Bank of England categorises as risky those mortgages where the total amount lent is 4.5 times or more of the salary of the borrower or borrowers. Some 530 new mortgages on homes in Aberdeen and Aberdeenshire exceeded this in 2014 compared to 373 in 2010.
The Bank of England introduced rules last year to limit the number of these risky loans lenders can offer. A maximum of 15 per cent of a bank's mortgage portfolio can exceed the 4.5 times salary ratio.
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