The map at right shows the proportion of recent buyers (1988-91) in each parliamentary constituency who have a mortgage worth more than the value of their house. It is based on one million mortgages borrowed from a national building society (which remains nameless for reasons of confidentiality).
The map should focus the minds of politicians as they prepare for the party conference season, as many of the constituencies worst affected are Tory marginals in the South-east. Basildon, the political sensor of the last general election, has the seventh worst total of negative equity (60 per cent) in Britain.
It is joined in the top 10 by Luton South (72 per cent), Newham South (69 per cent), Southend East (66 per cent), Leyton (65 per cent), Newham North East (61 per cent), Newham North West (61 per cent), Erith and Crayford (59 per cent), Walthamstow (58 per cent), and Croydon North West (57 per cent).
No northern constituency is in the top 200 on the list. The highest up is Bootle, at number 239, with 20 per cent. Eighty-five constituencies are listed as having no negative equity, all in Scotland, Wales or the north of England. This does not mean there are no households affected - though there will be very few - but that there was none in the million homes studied.
Daniel Dorling, a co-author of the study from which the map is drawn, said the three circumstances that combined to produce high rates of debt were the geography of, first, price falls, and second, of mortgage advances, and third, the time when people entered the market. The worst situation involved large numbers of people buying houses in 1988-89 with mortgages worth almost the value of the property in areas where prices have tumbled.
'People used to have the impression that it was yuppies who had negative equity,' said Dr Dorling, the Joseph Rowntree Foundation Fellow at Newcastle University. 'In fact, it tends to be first-time buyers who bought in the poorer estates, not people who made money in the Eighties.'
The Bank of England currently estimates that 1.25 million households are affected by negative equity. It puts the figure of outstanding debt at more than pounds 9bn.
There have been spectacular losses. One businessman outside Cambridge bought a house for pounds 600,000 with a mortgage of pounds 550,000. His house has just sold for pounds 200,000.
On the other hand, a quarter of recent buyers who bought in the cheapest four housing brackets now have negative equity, compared with just 4 per cent in the most expensive bracket. The average debt per household is estimated at pounds 4,400.
Dr Dorling's figures were calculated at the end of the third quarter of 1992, but he says they still apply today, as house prices have fallen and risen by equal amounts since.
Though negative equity is clearly a major influence on the property market in places such as Luton and Basildon, there are plenty of areas - including many in the South-east - where its effect is negligible. In prosperous areas, particularly in the middle and upper price range, agents are seeing good houses sell quickly. At present, there seem to be two parallel markets in operation, one of low-quality homes that can only sell for extremely low prices, and another of sought-after homes where the market is becoming increasingly buoyant.Reuse content