Stuck in negative equity? You could face 10 more years of it
Northern Ireland has the highest rate of negative equity in the UK – with some homeowners likely to remain stuck with a home worth less than the mortgage on it for the next decade.
According to figures from mortgage administration company HML, 41% of borrowers in Northern Ireland who have taken out mortgages since 2005 owed more than their house was worth during the last quarter of 2013.
That is the highest rate of 12 UK regions.
HML said that amounted to 68,024 homeowners in Northern Ireland – a staggering toll that can be explained by the 50 to 60% drop in house prices since the market peaked in 2007.
Across the whole of the UK, there were just over 460,000 homes in negative equity.
However, the number of households in negative equity has fallen from 75,615 (48%) in the second quarter of 2013. That suggests the problem may have already peaked.
Ulster Bank chief economist Richard Ramsey said borrowers on interest-only mortgages – whose monthly payment simply paid the interest on a mortgage rather than the capital sum – were worse off.
"In reality, it is those households/individuals who took out a mortgage in the mid-2006 to late-2008 period that will be experiencing the most severe levels of negative equity," he said.
"Those who took out interest-only mortgages are likely to still be in negative equity well into the next decade."
He said negative equity was not a major headache for those who had no plans to move – though it could disrupt first-time buyers who wanted to move up the property ladder but couldn't.
One example would include couples with young children living in apartments who would be trading up to more appropriate family accommodation if it wasn't for negative equity. "Essentially, negative equity is keeping many first-time buyers of 2006-08 in accommodation for much longer than they intended," he said.
Banks and building societies will not give figures for customers in negative equity and most would not comment on the issue.
However, a spokeswoman for building society Nationwide said: "We support existing customers in negative equity who have a demonstrable need to move home.
"All applications by existing customers in negative equity are assessed on an individual basis and to be eligible customers must be in permanent employment and be able to afford any additional borrowing, if required," she said.
Danske Bank said it worked with existing mortgage customers in negative equity on an individual basis, although all customers had to pay a deposit of at least 5%.
"Customers claiming financial difficulty are treated on a case by case basis with a view to putting in place arrangements acceptable to both the customer and the bank."
Estate agent Paddy Turley of UPS on Lisburn Road in south Belfast said cases of negative equity were "nothing new" and were particularly common among buyers who had outgrown apartments they bought in the boom.
James Gibbons, principal at property advisory firm GDP Partnership, said lenders north and south of the border took "markedly different stands" on customers in negative equity. Some building societies had reduced monthly payments to below the interest payable but others were less flexible, he said. "It is still the case that the banks here are looking for greater sums than most borrowers can lay their hands on."