NEGATIVE EQUITY AND BRITISH HOUSING IN THE 1990S - CAUSE AND EFFECT

This paper is concerned with the emergence in Britain in the early 199 0s of a large group of domestic mortgage holders with negative equity (i.e. whose property had fallen below the value of the mortgage advanc e used to purchase that property). The emergence of negative equity is traced to the conjunction of the long-term trend towards wider home-o wnership in Britain and the effects of deregulation of the financial s ystem in the 1980s. Using individual records from a major building soc iety, the temporal, geographical and social distribution of negative e quity is assessed. The results suggest that negative equity was far mo re likely to affect certain social groups living in particular places and that these appear to be the people least well placed to 'help them selves' out of debt. The concluding section attempts to draw out some of the policy conclusions from these findings.