A survey on regional variation in UK borrowers’ equity position and mortgage arrears indicates that debts continue to vary between the north and south of the country.
In the first quarter of 2011, Standard & Poor’s (S&P) analysed 1.5 million loans assisted by UK prime residential mortgage-backed securities and noted that mortgage borrowers in the north were 35 percent more likely to be in debt than those in the south, a jump from 25 percent in Q2 2010.
Mortgages in the negative equity comprised five percent of the sample, an increase from 3.6 percent nine months ago, with the northern region accounting for two-thirds of the rise.
Mark Boyce, Credit Analyst at S&P, said, “We believe the widening north-south gap in arrears is partly due to the significantly more robust employment trends evident in the south of the UK since the start of the recent downturn in 2007, compared with the trends in the north.”
“Our study also found that more mortgage borrowers in the north continue to be in negative equity, with northern regions accounting for about two-thirds of the overall rise in negative equity in the nine months to Q1 2011.”
“We believe that the sluggish housing market in northern regions over recent quarters may be partly responsible for this rise.”
On the upcoming fiscal austerity measures, Boyce stipulated that considering the north’s partiality towards the public sector, the ratings agency expects unemployment and arrears to increase.
“Mortgage risk in the north could diverge even further if the UKs already fragile economic recovery falters,” he said.
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