Up to 630,000 borrowers are stuck in negative equity as the housing market stagnates

New consumer finance watchdog warns further pain could be on the way despite Budget pledges

Up to 630,000 home loan borrowers are caught in negative equity, the UK’s new consumer finance watchdog said today.

The estimates were included in the Financial Conduct Authority's latest risk report, published alongside the new regulator's business plan for the coming year.

The FCA, which formally comes into being in April, estimates between 160,000 and 630,000 borrowers were in negative equity in January this year. The forecasts are based on house price indices compiled by lenders Nationwide and Halifax, as well as house price consultant Acadametrics.

The estimate - drawn from the Halifax's index, which shows house prices still 18 per cent below their peak in August 2007 – puts 6.4 per cent of Britain's 9.8m homeowners under water. But further pain could be on the way despite the Chancellor's attempts to reinflate the housing market in last week's Budget, the report added.

The FCA said: "Given that house prices remain out of line with their fundamentals, there could be further price falls, particularly if economic or financial conditions deteriorate. For those holding a mortgage, price falls can leave homeowners with little or negative equity in their homes, which can leave borrowers with unsustainable burdens of debt, unable to move and restricted in their options to remortgage on to better rates."

Despite the alarming figures, homeowners are faring far better than in the recession of the early 1990s.

Then around 1.1m borrowers were in negative equity – more than 10 per cent of mortgaged households – according to Bank of England estimates.

During the 1990s, negative equity was concentrated primarily in the South but this time around, the recession has hit the northern regions hardest, putting more homeowners in the North under pressure. The latest figures from property website Hometrack underlined the north-south split in the housing market as prices are buoyed by a lack of supply of homes and increasing demand.

House prices in London are growing at more than twice the national average – up 0.7 per cent in March – while homes in the capital are being snapped up at their fastest rate since the peak of the housing market in 2007. Across the country overall in the past two months the supply of housing for sale has risen by 13 per cent, but demand has risen by 19 per cent, Hometrack added.

Alongside a sluggish economy, the FCA's report added that the biggest risks included firms not designing products in consumers' long-term interests, as well as a lack of transparency for customers on financial products and services, and cyber attacks on payment systems.

It added: "There is an increasing threat of outside [cyber] attacks, which pose operational risks to firms and threaten market integrity through service disruption, breach or theft of personal information."

The regulator comes into being next month when the Financial Services Authority is split into the FCA and the Prudential Regulation Authority, which will be responsible for monitoring the health of the financial system and comes under the direction of the Bank of England.

Discover more property articles at Homes and Property
PROMOTED VIDEO
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Account Manager

£20000 - £35000 per annum: Recruitment Genius: This full service social media ...

Recruitment Genius: Data Analyst - Online Marketing

£24000 - £35000 per annum: Recruitment Genius: We are 'Changemakers in retail'...

Austen Lloyd: Senior Residential Conveyancer

Very Competitive: Austen Lloyd: Senior Conveyancer - South West We are see...

Austen Lloyd: Residential / Commercial Property Solicitor

Excellent Salary: Austen Lloyd: DORSET MARKET TOWN - SENIOR PROPERTY SOLICITOR...

Day In a Page

Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there