Negative equity stalks Northern England

Updated: 
Northern England has tipped further into negative equity with hundreds of thousands more home owners lumbered with a mortgage bigger than the value of their property.

Standard & Poor claims 8.5% of all homeowners in the North are now in negative equity, compared to 3.3% in the South. The average price of a home in the North East has also dipped under the £100k mark.


Mortgage worry

"At [the] end-2011, arrears in every northern government office region were at least 17% higher than in any southern region," says S&P's report. A big component of this story is employment - or rather unemployment - affecting mortgage credit conditions.

Between mid-2009 and December 2011, southern employment growth was 1.6%, an increase of about 210,000 jobs. Compared that with just 0.1% in northern regions (15,000 jobs).


In contrast, values in London continue to look mostly resilient. London house prices increased 6.7% year-on-year in Q4 2011 claim S&P. "Excluding London, U.K. house prices have increased by only 0.1% over the past 12 months."

The brokest towns in Britain

The brokest towns in Britain


Rates are rising

A huge worry for Northern homeowners, says Mark Boyce, author of the report, is renewing a mortgage after their mortgage deal has expired. Especially given the fall in property values.

Adding to the misery, the best value deals continue to be siphoned off to homeowners with a reasonable amount of equity (20% plus). A vicious circle for home owners and families on stretched or single incomes.

This report however is based on a small proportion (10% or 1.5m) of all existing outstanding mortgages. It's only a snapshot. But it's a snapshot that's likely to be close to the mark nationally.

To keep things in perspective, Bank of England interest rates remain low - at least superficially. But individual loan rates are on the rise: RBS-NatWest recently hiked rates from 3.75% to 4%. Halifax followed RBS with its own home loan rate lifting from 3.5% to 3.99%. This is an upward trend other lenders look likely to follow.

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