Double trouble: UK regions hit by unemployment and repossessions

Our interactive map shows local authority areas in England and Wales that suffer from higher than average repossession and unemployment rates.

When interest rates rise, these areas are likely to be those most vulnerable to an increase in foreclosure activity and falling house prices from growing sales of distressed property.

The combined effect of high unemployment and higher than average repossessions is felt particularly in Merthyr Tydfil and Blaenau Gwent in South Wales, as well as the London boroughs of Newham, Barking and Dagenham.

The three London boroughs have particularly suffered in the past five years, while Merthyr Tydfil and Blaenau Gwent have only recently developed as hotspots, mostly due to a big rise in unemployment.

To highlight the areas that suffer from high rates in both categories, we reviewed mortgage repossession data from the Ministry of Justice and unemployment rates from the Office of National Statistics. We assigned a score for each value, representing the deviation from the average repossession rate and unemployment rate respectively. The two scores were then combined*.

In some areas high rates in one value skew the combined rate. The latest unemployment data suggest that Corby, for example, has lower than average joblessness, but its very high repossession rate renders it a recession hotspot under our measures. Conversely, the high unemployment rate in South Tyneside overrides the relatively low repossession rate.

Unemployment is only one factor that affects repossession and it is particularly significant if it affects the head of the household. Other variables are falling house prices and high debt service to income levels. “If house prices are falling, it’s rational for a lender to foreclose on you sooner rather than later,” says Bart Lambrecht, professor of finance at Lancaster University.

* We have assigned the following colour codes to the combined scores.
3 and more – Worst affected areas

Between 2 and 2.99 – Significantly worse than average

Between 1.99 and 0.5 – Worse than average

Between 0.49 and 0.49 – Average

Between -0.5 and -1.99 – Better than average

Between -2 and -2.99 –- Significantly better than average

-3 and lower – Least affected areas

Data sources:

Ministry of Justice: Annual mortgage possession claims leading to orders made per 1,000 households in England and Wales, within England, Government Office

ONS unemployment rate (%) for 2005 – 2010. 2010 figures are from July 2010, the latest available data.