From today's FT:
One in 10 borrowers with an excellent credit record are trapped in negative equity, owing more on their mortgage than the value of their homes, says a report that forecasts a peak-to-trough fall in house prices of up to 35 per cent.Tuesday's report by Fitch Ratings, which is based on loan information from 2.7m borrowers, found the highest concentration of negative equity was in Northampton, where 17 per cent of borrowers were under water...
Lenders with the highest levels of borrowers in negative equity included Northern Rock, which was nationalised in 2008, Bradford & Bingley, also rescued by the government, Birmingham Midshires, which is part of HBOS, and Alliance & Leicester, owned by Santander, the Spanish banking group.
In its report, Fitch said negative equity could rise to 23 per cent of all borrowers and to a third of all loans by value if its forecast of a peak-to-trough decline in house prices of 30-35 per cent was correct.
The study derived house values from the Nationwide House Price Index, which is down roughly 20 per cent so far. The high numbers of borrowers in negative equity reflected the impact of falling house prices and "criteria creep" among lenders that had offered loans at ever higher percentages of house purchase prices during the boom...
Bond
59 minutes ago
5 comments:
Oh come on, house prices aren't going to fall by 30%. Lending is already stabilising and while interest rates are no doubt going to be hiked up over the next couple of years, demand is still strong.
I wonder why we don't hear stories of renters in negative equity where their rent pays more than the interest on the landlords loan.
LFAT. House prices as a ratio of NAE are typically about 3.25 times. They got to 6 times.
Either we are going to have massive wage rises, or massive house price falls, or massive general rises in wages and prices (ex housing) caused by QE, whilst house prices stay static.
Banks are still not making any money and cannot get a (in)decent spread.
This is a phoney war. The QE is designed to get Brown to the next election, whatever longer term damage it does. Plus if the Tories get in there has to be savage redundancies in state employees. Maybe 1 to 3 million. So ending QE plus rising unemployment = falling house prices.
LFAT, prices have already fallen 20% on average, so not much further to go (as Lola points out). Even if they don't, I'd take the figure of 10% being in Nequity at face value.
People, like me, who have the dubious distinction of living in Northampton have been informed that the negative equity rate is 24%.Northampton always does well in all negative indices , which the townspeople take a certain pride in ,casting doubts on the accuracy of any league,listing or poll which does not place them in the highest category of awfulness.
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