One in 10 hit by negative equity

13:59 24 June 2009

One in 10 borrowers in the UK is in negative equity, owing more on their mortgage than the value of their homes, according to a new report.

Alarmingly this figure could worsen to one in three homeowners if house prices across the county continue to fall.

The international ratings agency Fitch, who conducted the study, found that Northampton, Nottingham and Derby in the East Midlands were the worst affected cities.

Here the highest proportion of loans in negative equity (21.8% by value and 15.1% by number of borrowers).

Scotland has the lowest proportion of negative equity (5.4% by value and 3.6% by number of borrowers) and London is also relatively unaffected.

Alastair Bigley of Fitch Ratings on negative equity in the UK: "Even assuming that house prices see a modest recovery from their lowest levels, most RMBS transactions are likely to have a sizeable proportion of borrowers in negative equity for some time to come."

Mortgage lenders with the highest levels of borrowers in negative equity included Northern Rock, Bradford & Bingley, Birmingham Midshires and Alliance & Leicester – all of which fell into trouble in 2008 when the recession began to take hold.

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The top 10 towns and cities in negative equity (town followed by % of negative loss)

1. Northampton - 16.9%
2. Nottingham - 16.2%
3. Derby - 15%
4. Cardiff - 14.7%
5. Wigan - 14.5%
6. Manchester - 14.5%
7. Peterborough - 14.1%
8. Lincoln - 13.8%
9. Hull - 13.4%
10. Blackburn - 13.4%