ONE in ten homeowners are in negative equity – with the picture even bleaker in parts of the North-East and likely only to get worse.

A report by international ratings agency Fitch found that as many as 270,000 borrowers across the UK with previously good credit histories were now financially “underwater”.

This was because a slide in house prices had left them owing more on their mortgage than their home is worth.

Fitch said more than a fifth of mortgage borrowers could find themselves in this situation if the slide continued.

It also singled out Newcastle- based Northern Rock as the lender with the largest proportion of homeowners in negative equity, with an estimated 28 per cent of borrowers who bought prime loans through its Granite programme affected.

It said this could increase to as many as 47 per cent if, as expected, house prices further decline and bottom out at 30 to 35 per cent below their peak levels of 2007.

The report said Northampton had the highest proportion of borrowers who owe more than the value of their home – 17 per cent.

In this region, Darlington was the highest placed area (11.1 per cent), followed by Durham (10.8 per cent), Cleveland (9.8 per cent), Newcastle (9.6 per cent) and Harrogate (6.8 per cent).

However, figures were far higher when pared down to specific postcodes in which prices rose most during the housing boom.

Central Sunderland (SR1), for instance, had 28.1 per cent of borrowers whose home was in negative equity.

Ketan Thaker, of Fitch, said: “While prime borrowers are unlikely to default solely because the value of their house is less than the outstanding balance of their mortgage, we expect default rates to be higher for borrowers in negative equity.

“Borrowers with equity in the property have options available to them in case of financial distress that borrowers in negative equity do not.”

However, Andrew Montlake, of independent mortgage broker Coreco, said people should not panic.

He said: “Negative equity is only a problem if you have to move or remortgage, and for many homeowners they are not in this position and can hopefully ride out the storm and wait for prices to rise again.”

A spokeswoman for Northern Rock said it was not commenting on the report.

But she added: “If people are feeling the pinch or are worried about their financial circumstances we would encourage them at the first available opportunity to contact us so we can assess their situation on an individual basis and offer them as much help as possible.”