Negative equity is blighting nearly one in six prime mortgages in the UK, according to the latest findings from Fitch, the ratings agency.

It said that one in ten homeowners with excellent credit records are saddled with mortgages worth more than the value of their homes, or 15 per cent of prime residential mortgages by value. The report added that the figure would rise to 34 per cent over the next year if house prices continue to fall until 2010.

Northern Rock, the nationalised lender, has been worst hit by negative equity, with 32 per cent of loans in its specialist Granite mortgage division affected. Between 19 per cent and 25 per cent of loans at specialist divisions of Birmingham Midshires, Bradford & Bingley and Alliance & Leicester are also in negative equity, says Fitch.

The report reveals that negative equity is widespread across the country. In the postcode of SR1, in Sunderland, 43.7 per cent of loans by value are in negative equity. This translates to 28.1 per cent of homeowners, the highest proportion in the UK. Northampton has the biggest city-wide negative equity problem, with 16.9 per cent of borrowers, or 23 per cent of mortgages in terms of value in negative equity. By region, the East Midlands contains the highest proportion of loans in negative equity, while Scotland has the lowest.

Ketan Thaker, a director at Fitch, warned that although prime borrowers were unlikely to default on mortgage payments purely because they were in negative equity, it reduced the options available to those who were struggling with debt.

He said: "Borrowers with equity in the property have options available to them in case of financial distress that borrowers in negative equity do not, for example sale of property, remortgaging, better availability and pricing of products, and the withdrawal of equity to fund temporary cash shortage, which could help avoid foreclosure."

The research is based on analysis of mortgages contained within residential mortgage-backed securities, the bonds that lenders previously traded as a way of raising new finance.