1.7m households facing spectre of negative equity

An analysis of UK mortgages undertaken by leading financial outsourcer, HML, shows that
Currently 827,321 homeowners (7.3 per cent of all households with a mortgage) have a debt that is higher than the value of their property.

If house prices fall by 10 per cent that number will double to 1,673,707 (14.8 per cent), which is close to the record 1.8m negative equity cases seen in the house price crash of the early 1990s.

The analysis also shows that nearly a third of all borrowers in Northern Ireland (93,134 or 30.4 per cent) could be trapped by negative equity while the North West of England will be the region with the highest number of homeowners with loans larger than the value of their property (213,674).

What’s more, if house prices do fall by 10 per cent, nearly 1 in 4 borrowers (23.8 per cent) with negative equity will be under the age of 30 and a further 23 per cent will be aged between 30 and 40.   

HML’s chief finance officer Neil Warman said:

“This analysis show just how vulnerable UK households are to a continuing fall in house prices.

"Since their peak before the onset of the credit crunch, house prices have fallen by nearly 18 per cent and, although there’s considerable variation in future forecasts, a number of analysts are saying we need to brace ourselves for further falls.

“HML’s data shows that even if house prices dip by just 2.5 per cent, more than 1m UK households will have a mortgage debt that is larger than the value of their home.

"For many regions, negative equity could hinder the free movement of labour, especially among younger borrowers, which will inevitably contribute towards a delayed economic recovery.”