Nearly one in six in negative equity

 

Wednesday, Jun 24,2009, 10:19:32 AM   Click:

Negative equity is blighting nearly one in six mortgages in the United Kingdom, according to the latest findings of Fitch, the rating agency.

She said that owners of one in ten with excellent credit records are struggling with mortgages over the value of their homes, or 15 per cent of the prime residential mortgages by value. The report adds that the figure of 34 per cent over the next year if house prices continue to decline until 2010.

Northern Rock, the nationalized lender, was hardest hit by negative equity, with 32 percent of its specialist mortgage division Granite affected. Between 19 percent and 25 percent of loans to specialists divisions of Birmingham Midshires, Bradford & Bingley and Alliance & Leicester are also in a net negative, "says Fitch.

The report shows that negative equity is widespread throughout the country. In the postal code of the SR1, in Sunderland, 43.7 percent of loans by value are in negative equity. This represents 28.1 per cent of owners, the highest proportion in the United Kingdom. Northampton has the largest city on the scale of negative equity problem, with 16.9 per cent of borrowers, or 23 per cent of mortgages by value in negative equity. By region, the East Midlands have the highest proportion of loans in negative equity, while Scotland has the lowest.

Ketan Thaker, a director at Fitch, warned that although the first borrowers were unlikely to default on mortgage payments because they were net negative, it reduces the options available to those who were in with debt.

He said: "Borrowers with equity in the property have options available to them in case of financial difficulties that borrowers in negative equity are not, for example the sale of property, remortgaging, better availability and prices, and the withdrawal of equity to finance temporary cash, which could help to avoid foreclosure. "

The research is based on the analysis contained in the residential mortgage securities backed by mortgages, bonds that donors previously traded as a means of raising new funds.

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This was an inevitable consequence of ignoring the soaring house prices during the boom. The disturbing fact is home prices are still too many for the benefit of income * 6 vs. an average of 3.7 * income. Adjusted for inflation values are even higher peak of the last arrow.