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North-South Mortgage Divide


Monday, April 23, 2012

UK Property - Negative Equity MapNegative equity is not a situation that many professional landlords with Rent Guarantee insurance and good rental yields has to worry about, but for many new or “reluctant” landlords forced to rent out their former homes in order to keep the mortgage paid, it can be a real problem.

UK Buy To Let landlords and homeowners are increasingly struggling to repay mortgages that are greater than the current value of their properties – and it’s worse up North.

A report by credit ratings agency, Standard and Poor, states that Hundreds of thousands of residential property owners and Buy To Let landlords have seen the value of their investments plummet in the North-East and North-West.

In clear evidence of a widening North-South divide, 11.9% of borrowers in the North-East are said to be in negative equity, compared to only 3% in the South-East, including London.

8.5% of borrowers in the North saw the value of their properties become less than the balance of their mortgage loans in the last quarter of 2011.

Overall the number of UK homeowners facing negative equity increased from 3.6%, in spring 2010, to 5.6% in the fourth quarter of 2011.

In the North 4.4% of residential property owners and landlords without Rent Guarantee insurance were in mortgage arrears, compared to just 3.4% in the South.

Standard and Poor spokesman Mark Boyce said “The situation has deteriorated as house prices continued to drop. While decreasing equity does not immediately reduce a borrower’s ability to service their debt, it tends to limit their ability to refinance, or to sell to clear their mortgage.”

In August 2011, the Council of Mortgage Lenders (CML) estimated that 827,000 families in the UK faced negative equity, with half having bought their homes during 2006-2008 whilst mortgage lending was still competitive and residential property prices were at their peak. Of these families currently facing negative equity some 326,000 were first-time buyers, (FTB).


This was written by Mike Clarke. Posted on at 9:00 am. Filed under Landlord News. Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink. Follow comments here with the RSS feed. Both comments and trackbacks are currently closed.