Households in Negative Equity Amount to 15%

The latest results of the research* conducted by the leading UK rating agency Fitch suggest that the number of households in negative equity has increased and amounts to approximately 15%. The research showed that one in six homeowners with positive credit history have taken out mortgages that now exceed the value of their homes and that this figure might rise to as much as 34% in the course of 2009 if property prices continue its decline. The Northern Rock bank is said to be hit by negative equity the worst as 32% of mortgages given out by its Granite mortgage division being affected. According to Fitch, Northern Rock is closely followed by Alliance & Leicester and Bradford & Bingley with 25% and 19% of negative equity respectively. Unfortunately, negative equity is widespread in the United Kingdom. Sunderland tops the list with 28.1% of households being in negative equity. Northampton with 23% of mortgages in negative equity in terms of value takes the 2nd place. In terms of regions, the East Midlands are characterized by the highest proportion of residential mortgages in negative equity; on the other end of the spectrum is Scotland. Ketan Thaker, Fitch director claimed that despite the fact that prime mortgage borrowers are still unlikely to default on the commitments, the increasing number of households in negative equity leaves fewer options for those who are currently in arrears. He added that those who do have equity in their properties have more choices, such as remortgaging and sale of property, in case of financial difficulties while borrowers in negative equity do not have these options. *The research conducted by the Fitch was based on the analysis on mortgages that are contained within mortgage-backed securities of residential property.