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
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs General

Marketing & PR Assistant - NW London

£15 - £17 per hour: Ashdown Group: Marketing & PR Assistant - Kentish Town are...

Senior Network Integration/Test Engineer

£250 - £300 per day: Orgtel: Senior Network Integration/Test Engineer Berkshir...

Software Developer - Newcastle - £30,000 - £37,000 + benefits

£30000 - £37000 per annum + attractive benefits: Ashdown Group: .NET Developer...

Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

We know all too much about the cruelty of Isis – but all too little about who they are

Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
Neanderthals lived alongside humans for centuries, latest study shows

Final resting place of our Neanderthal neighbours revealed

Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
Scottish independence: The new Scots who hold fate of the UK in their hands

The new Scots who hold fate of the UK in their hands

Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

Blight club: Britain's ugliest buildings

Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape
eBay's enduring appeal: Online auction site is still the UK's most popular e-commerce retailer

eBay's enduring appeal

The online auction site is still the UK's most popular e-commerce site
Culture Minister Ed Vaizey: ‘lack of ethnic minority and black faces on TV is weird’

'Lack of ethnic minority and black faces on TV is weird'

Culture Minister Ed Vaizey calls for immediate action to address the problem
Artist Olafur Eliasson's latest large-scale works are inspired by the paintings of JMW Turner

Magic circles: Artist Olafur Eliasson

Eliasson's works will go alongside a new exhibition of JMW Turner at Tate Britain. He tells Jay Merrick why the paintings of his hero are ripe for reinvention
Josephine Dickinson: 'A cochlear implant helped me to discover a new world of sound'

Josephine Dickinson: 'How I discovered a new world of sound'

After going deaf as a child, musician and poet Josephine Dickinson made do with a hearing aid for five decades. Then she had a cochlear implant - and everything changed
Greggs Google fail: Was the bakery's response to its logo mishap a stroke of marketing genius?

Greggs gives lesson in crisis management

After a mishap with their logo, high street staple Greggs went viral this week. But, as Simon Usborne discovers, their social media response was anything but half baked
Matthew McConaughey has been singing the praises of bumbags (shame he doesn't know how to wear one)

Matthew McConaughey sings the praises of bumbags

Shame he doesn't know how to wear one. Harriet Walker explains the dos and don'ts of fanny packs
7 best quadcopters and drones

Flying fun: 7 best quadcopters and drones

From state of the art devices with stabilised cameras to mini gadgets that can soar around the home, we take some flying objects for a spin
Joey Barton: ‘I’ve been guilty of getting a bit irate’

Joey Barton: ‘I’ve been guilty of getting a bit irate’

The midfielder returned to the Premier League after two years last weekend. The controversial character had much to discuss after his first game back
Andy Murray: I quit while I’m ahead too often

Andy Murray: I quit while I’m ahead too often

British No 1 knows his consistency as well as his fitness needs working on as he prepares for the US Open after a ‘very, very up and down’ year
Ferguson: In the heartlands of America, a descent into madness

A descent into madness in America's heartlands

David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

BBC faces corruption allegation over its Sir Cliff police raid coverage

Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home