According to research by rating agency Standard & Poor's, 8.5% of mortgages in the North of England were in negative equity in March compared to 2.5% in the South.
The research, carried out using a sample book of £150bn secured mortgages, showed a rise from 6% of mortgages in negative equity in the North, and 1.5% in the South, since quarter two of 2010.
In March 2011, S&P found 5.0% of UK mortgages were in negative equity, up from 3.6% nine months earlier, with Northern regions accounting for two-thirds of the increase.
The researchers said: "We believe the divergence in underlying employment and housing market dynamics help to explain the mortgage performance differential between the North and South of the country. Looking ahead, we think the government's planned public spending cuts through 2015 could disproportionately affect Northern regions – where public sector employment is more widespread. As a consequence, we believe the regional divergence in mortgage risk may continue."
The level of Northern borrowers behind on their mortgage payments rose slightly to 3.9% from 3.8% in the nine months to March 2011.
The report continued: "Mortgage borrowers in the North of the country are about 35% more likely to be in arrears than those in the South, according to our analysis of a sample of 1.5 million securitised loans as of Q1 2011. We believe this 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. What's more, the gap in arrears appears to be widening: When we conducted our initial study based on data from Q2 2010, the difference in arrears between the North and South was only 25%."