Almost one in 10 borrowers in the North of England will be at risk of negative equity if house prices fall by 10%, credit ratings agency Moody’s has warned.
Almost one in 10 borrowers in the North of England will be at risk of negative equity if house prices fall by 10%, credit ratings agency Moody’s has warned.
Southern borrowers would also be at risk with butjust 0.03% would drop into negative equity.
Steven Becker, an analyst at Moody's, said: "Post-crisis price gains have not been even across the country, placing borrowers in northern England, Wales and Scotland at greater risk of negative equity if house prices were to decline."
Certain loan types are more sensitive to price movements than others withMoody's saying borrowers with interest-only mortgages and those whoobtained a mortgages between 2006-2008 are most likely to lose the equity they gained if house prices fall.
Interest-only loans account for just over a thirdof outstanding owner-occupied UK mortgages. Borrowers with interest-only loans originated in 2006-2008 are most susceptible to negative equity in this instance.
Becker added: "Interest-only loans, which were most prevalent in the run-up to the financial crisis, are more likely to fall into negative equity because their principal balance stays constant while prices move. When a borrower owes more than a property is worth, the likelihood of default increases."
The figures came as the Bank announced that the outlook for the property market had deteriorated since the EU referendum in June.
