I found a group called ‘Reset’ who are group hoping to lobby on behalf of people in negative equity and arrears in the UK and Ireland. They have a presentation which I have posted part of.

Why Negative Equity Matters: Lower house prices, which may lead to negative equity, can reduce housing investment by builders as well as investment by home-owners in their property.

The fall in property value impacts the overall wealth of a country and may impact consumption.

As home values fall or as negative equity becomes an issue, financial institutions may start to reduce the level of lending their offer, and increase the cost of borrowing.

If the cost of re-financing a mortgage increases and the ability to re-finance is reduced due to stricter terms (e.g. loan-to-value ratio) the mortgage holder may be disadvantaged.

People who find themselves in negative equity may increase their rate of savings to pay down the principal, thus reducing their consumption and hurting the economy.

Negative equity could make it difficult to sell your house, impacting a persons ability to move (e.g. for a new job).

This lower mobility may impact the number of transaction in the housing market, hurting real-estate and other sectors of the economy.

Negative equity coupled with certain negative economic conditions may lead to higher
defaults and result in stress for the banking sector.

Negative Equity in Ireland: The Independent reported that 640,000 out of Irelands 1.5m households have a
mortgage with a combined mortgage debt of €148 billion. This is equal to €230,000 per mortgaged household.

In addition to this debt, the average household is estimated to have a further €16,000 of unsecured debts (e.g. credit cards, auto loans).

With the average house in Ireland worth €187,000, the Irish Independent concludes that the the average mortgaged household has €43,000 of negative equity.

Taking thing this average and multiplying it by the no. of mortgages would yield a collective €27.5 billion of negative equity in Ireland. (NB: actual figure may diverge significantly, given no mortgage is the same).

The Economic and Social Research Institute (ESRI) estimates that 116,000 households may be in negative equity in by the end of 2009, rising to 196,000 by theend of 2010.

If house prices fall by 50% from their peak, the ESRI estimate that approximately 350,000 households would be in negative equity.

We wish Reset the best of luck with their work.