WHO HAS NEGATIVE EQUITY - HOW HOUSE PRICE FALLS IN BRITAIN HAVE HIT DIFFERENT GROUPS OF HOME BUYERS

This paper reports the results of a study which used a set of individual mortgage records from a major building society to examine the distribution of negative equity between different categories of borrowers in Britain by the third quarter of 1993. The major findings are: negative equity was disproportionately held by borrowers with properties in the South East (although there are very significant micro-spatial variations); only in the northern regions of Britain were people with mortgage advances of move than 90% of purchase price unlikely to have negative equity; negative equity was disproportionately held by those who purchased their property between 1988 and 2991; negative equity is disproportionately held by those on lower incomes; negative equity is disproportionately held by younger borrowers. In every region it is borrowers who were under 25 at the time of purchase who held the largest proportions of negative equity in 1993. Negative equity is disproportionately held by those who purchased properties at the lower end of the market (in every region if was 1988-91 borrowers whose property was purchased for less than pound 40 000 who were most likely to have negative equity. Negative equity was disproportionately held by borrowers whose occupations at the time of purchase were in clerical or manual work. Some of the implications of these findings are discussed.