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Fitch Report Highlights Negative Equity Woe

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Fitch report highlights negative equity woe

By Norma Cohen, Economics Correspondent

Published: June 22 2009 23:33 | Last updated: June 22 2009 23:33

One in 10 borrowers with an excellent credit record are trapped in negative equity, owing more on their mortgage than the value of their homes, says a report that forecasts a peak-to-trough fall in house prices of up to 35 per cent.


Tuesday’s report by Fitch Ratings, which is based on loan information from 2.7m borrowers, found the highest concentration of negative equity was in Northampton, where 17 per cent of borrowers were under water.

There, nearly a quarter of all loans by value were secured against property that was worth less than the sums owed.

Lenders with the highest levels of borrowers in negative equity included Northern Rock, which was nationalised in 2008, Bradford & Bingley, also rescued by the government, Birmingham Midshires, which is part of HBOS, and Alliance & Leicester, owned by Santander, the Spanish banking group.


Graphic: Negative equity - Jun-23

Scourge of recessions past makes comeback - Jun-22

Northampton is negative equity black spot - Jun-22

In its report, Fitch said negative equity could rise to 23 per cent of all borrowers and to a third of all loans by value if its forecast of a peak-to-trough decline in house prices of 30-35 per cent was correct.

The study derived house values from the Nationwide House Price Index, which is down roughly 20 per cent so far. The high numbers of borrowers in negative equity reflected the impact of falling house prices and “criteria creep†among lenders that had offered loans at ever higher percentages of house purchase prices during the boom.

Some areas have escaped the housing crisis relatively unscathed. In Glasgow, only 4 per cent of borrowers were under water. Fitch said the data were a snapshot that might not reflect the full market.

Copyright The Financial Times Limited 2009

Edited by Tom Peters

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Ah, that explains a lot - Wales second highest UK region in negative equity. Explains why we are seeing so few drops in asking prices... the sellers can't afford to drop their asking prices....

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