Negative equity haunts one in five Northern Rock borrowers
As the housing market downturn continues, Northern Rock customers are more likely to be facing negative equity than borrowers with other UK lenders.
While the number of people in arrears with their mortgage repayments is rising across the banking sector, Northern Rock is more exposed than most of its competitors because prior to the credit crisis, it offered home loans of up to 125% of a property’s value.
According to a report in the Telegraph, the lender is expected to reveal that around one in five of its mortgage customers face negative equity during 2009.
This equates to approximately £20 billion of the bank’s loan book and could leave around 140,000 households with mortgages that cannot be redeemed through the sale of their properties.
The bank has been trying to shrink its loan book and last month launched a scheme under which Lloyds TSB offered mortgages to Northern Rock customers whose fixed-rate terms were coming to an end.
However, Lloyds will be cherry-picking Northern Rock borrowers and those already in or close to negative equity will find it difficult to remortgage with Lloyds or any other lender.
Last week, HBOS predicted that house prices will fall by up to 20% by the end of 2009.