Mortgage borrowers in the north of the UK are more likely to be in arrears and negative equity than those in the south, and the divide is likely to grow as government spending cuts take affect, according to ratings agency Standard & Poor’s (S&P).
The agency said its analysis of 1.5m mortgage accounts showed homeowners in the north were 35% more likely to be at least 30 days behind on repayments in the first three months of 2011, and that the gap had widened since the last quarter of 2010 when the figure stood at 25%.
Since then arrears had fallen in the south, but increased in other areas. While in London the number of loans in arrears fell from 3.2% to 3%, in Yorkshire and the Humber it increased from 3.9% to 4.1%, and in Scotland it went up from 3.2% to 3.4%.
S&P said the difference was partly due to “more robust employment trends” in the south since 2007, when the recent downturn began, and that plans to cut government jobs meant more northern households could fall behind on repayments.
The report’s author, credit analyst Mark Boyce, said: “Given the north’s public sector jobs bias we anticipate that unemployment in those regions – and consequently arrears – could escalate. And mortgage risk in the north could diverge even further if the UK’s already fragile economic recovery falters.”
While the number of homeowners in negative equity increased across the UK as a whole, most of the upturn was focused in northern regions. In the first three months of 2011 8.5% of loans were in negative equity in northern regions – a jump from 6% in the last three months of 2010.
In the south the number rose from 1.5% to 2.5%, and S&P said northern regions accounted for about two-thirds of the overall rise in negative equity over the nine months to the end of March, even though the number of loans there accounted for only 40% of the sample being analysed.
Boyce said: “We believe the sluggish housing market in northern regions over recent quarters may be partly responsible for this rise.”
The S&P data puts the proportion of homes in negative equity at 16.2% in the north-east of England, but just 2% in the south-east and London. However, Scotland also has low levels of negative equity at just 3%.
Across the UK as a whole it put the proportion of mortgages in negative equity at 5%, up from 3.6% last summer. This is lower than the figure published recently by the Council of Mortgage Lenders, which showed 7% of borrowers owed more than the value of their property.