Stagnated house prices result in up to 630,000 borrowers languishing in negative equity

Figures from the UK’s consumer finance watchdog have highlighted that up to 630,000 borrowers find themselves stuck in negative equity as house prices continue to stagnate.

The figures have been compiled using data obtained from lenders Nationwide and Halifax, with Halifax’s index showing house prices still 18% below their peak in 2007, leaving 6.4% of Britain’s homeowners in the red.

The Financial Conduct Authority’s latest risk report, which includes these statistics, also warns that the problem could worsen despite the Chancellor’s attempt to reignite the housing market. The FCA stated “Given that house prices remain out of line with their fundamentals, there could be further price falls, particularly if economic or financial conditions deteriorate.”

The current situation however is reasonably mild compared to that of the 1990’s, when around 1.1 million borrowers were stuck in negative equity, which, according to Bank of England estimates, equated to more than 10% of the total number of mortgaged households.

Areas in the south of England suffered the highest percentage of homeowners in negative equity during the 90’s, with the South West and South East being the most affected areas with totals of 19% and 26% respectively. This can be compared to the latest Halifax Index figures that reveal that in 2013 the percentages of negative equity homeowners in the South has decreased, with the South West and South East both being at 3%.

However, it has had an opposite effect in the North. During the 1990’s, 6% of homeowners in the North East had negative equity along with 5% in the North West. Unlike the South, where percentages decreased in 2013, percentages in the North increased, with both the North West and East rising to 10%.

This highlights the ever growing North-South divide in the housing market and the downward price pressure that continues to affect the area. See our monthly factfile for more and this article to read further on the current geographical divide.

Times are undeniably tough but, when it comes to negative equity at least, most of us have it pretty good compared to our 90’s counterparts.

28/03/2013                                                                                                                  BT/SRJ/LCB


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