Latest News

Scotland has by far the fewest home owners in negative equity, confirming the nation's reputation for greater price stability and our more cautious approach to spending and borrowing on property. 

Research by the Council of Mortgage Lenders (CML) estimates that just 1.0 per cent of owner occupiers in Scotland are in negative equity - where the size of the mortgage is greater than the market value of the property.  That is in marked contrast to the rest of the UK.  The CML estimates that across the UK, 4.8 per cent of home owners are in negative equity and in some areas, such as Greater London, as many as 6.5 per cent of homes find that they owe more than their home is worth.

That Scotland has seen so little negative equity so far is partly due to the greater stability of house prices north of the border and partly due to natural caution about borrowing to buy property.

Data from the Nationwide building society and the Halifax show that prices in Scotland have fallen by much less than the rest of the UK.  That means that fewer homes have seen their value fall below the level of the amount borrowed.  Equally, Scots tend to borrow less as a multiple of their income when buying their home.  The Halifax reports that mortgage repayments in Scotland take up a lower proportion of income than anywhere else in the UK; smaller mortgages means that fewer homes face a shortfall in the value of their homes. 

Despite the rise in the number of households in negative equity, the CML says that the impact on owners and the market should not be as dramatic as it was in the last property downturn in the early 1990s.  Firstly, far fewer homes are affected, around 900,000 today compared to 1.5 million in 1993.  And, according to Bob Pannell, CML head of research: "It should be easier for households to rebuild their equity position than in the early 1990s, as low interest rates on their mortgage can help them to save or overpay more quickly."

The CML refutes the assumption that there is a strong link between negative equity and defaults on mortgage payments.  It says that in the last downturn, most home owners:  "Sat tight, saved, continued to pay their mortgages and eventually recovered their equity position".   It points out that payment problems are typically associated with unexpected spending commitments, reduced income and changes in household circumstances rather than negative equity.

Bob Pannell argues that the main impact of negative equity will be to limit the freedom of some home owners to move: "Negative equity will contribute to subdued property turnover, but otherwise should have few adverse effects for the majority of households affected".