Blackfriar: Mortgage debts show that it’s looking grim in the North

Already housebuilders have said they are concentrating land purchases on the South where prices are more robust.

S&P looked at 1.5m prime residential securitised loans, comparing bad debts in the first three months of 2011 with arrears in the April to June 2010 period.

It found homeowners in the North are 35 per cent more likely to fall into arrears with their mortgages than borrowers in the South.

The influential ratings agency says the North’s reliance on public sector employment could further drive the arrears gap – as unemployment increases, so will the likelihood that homeowners default on their mortgages.

Mortgage arrears in Yorkshire and the Humber rose to 4.1 per cent in the first three months of the year, compared with 3.9 per cent nine months earlier. By contrast, arrears in London and the South East had fallen to three per cent from 3.2 per cent.

Some 8.4 per cent of Yorkshire’s mortgages were in negative equity – when the value of a property has fallen below the outstanding amount on the mortgage. That was up from 6.2 per cent nine months earlier and contrasts with a negative equity rate of just two per cent in London.

“We believe the widening North-South gap in arrears is partly due to the significantly more robust employment trends evident in the South of the UK since the start of the recent downturn in 2007, compared with the trends in the North,” said S&P credit analyst Mark Boyce.

What’s worrying is Northern arrears are rising despite the lowest ever interest rate environment.

Based on the Bank of England’s 0.5 per cent base rate, banks and building societies are offering homeowners record low rates.But even this has not been enough to prevent bad debts increasing. S&P’s worries cannot be ignored: Northern cities have yet to feel the full brunt of public sector job cuts.

Real wages are falling for many, while inflation, last recorded at 4.4 per cent, continues its march upwards as food prices remain stubbornly high and energy suppliers force through double digit increases.

Yesterday’s rising unemployment figures showed Yorkshire unemployment higher than the UK average at 8.5 per cent. This will fuel concerns over an already wide North-South gap – subject of the Yorkshire Post’s Fair Deal campaign – and increase the likelihood of the bad debts disparity growing. The danger is that this will be followed by a glut of repossessions.

n Sir Ken Morrison, the former head of Morrisons, has always been a maverick.

In the days before the Bradford-based group bought Safeway, Sir Ken refused to come down to London for interim and preliminary results, preferring to keep the City at arms’ length.

At the time he was able to get away with it, much to the City’s chagrin.

Prior to the £3bn takeover in 2003, Morrisons could do no wrong. Record profits followed record profits every year.

Sir Ken has built up a whole reputation on refusing to toe the City line.

When asked why he didn’t employ some non-executive directors he retorted that the money would be better spent on a couple of extra check-out girls.

It has taken the Financial Services Authority four months to decide that Sir Ken failed to disclose shares sales in 2009 and 2010 which reduced his holding in the company from 6.4 per cent, a holding worth over £450m, to 0.9 per cent.

The FSA said Sir Ken, whose father founded the chain, had not financially benefited from the breaches, but his failure to notify Morrisons of the changes prevented it from updating the market in accordance with Stock Exchange rules.

It fined him £210,000 for failing to reveal a series of share sales.

Tracy McDermott, the FSA’s acting director of enforcement and financial crime, said: “Investors are entitled to know when major and influential shareholders significantly reduce their interest in a listed company.

“Sir Ken should have been aware of his obligations and his failure to meet them has resulted in this fine.”

Sir Ken failed to notify Morrisons on four separate occasions when his voting rights fell below six per cent, five per cent, four per cent and three per cent, which resulted in the market being misled as to the ownership of voting rights in Morrisons.

Sir Ken’s shareholding was even stated incorrectly in the company’s 2010 annual report.

It’s an embarrassing oversight, but adds weight to the impression that Sir Ken is a man who lives life on his own terms – and his little regard for the City.