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Negative equity entraps 145,000 homeowners

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by Gill Montia
Negative equity entraps 145,000 homeowners

A survey conducted by CACI for the Daily Telegraph indicates that one in eight people who have borrowed money to buy their homes since the beginning of last year could be in negative equity.

According to the research, almost 145,000 homeowners now have mortgages that exceed the value of their properties.

In addition, CACI is predicting that 360,000 borrowers could be in negative equity by the end of this year, if house prices decline by as much as 20%.

Negative equity may only become a serious problem when a homeowner needs to remortgage, move house or cannot afford mortgage repayments.

The estimate from CACI is well below levels seen in the early 1990s, when tumbling house prices left 1.7 million homeowners in negative equity and in 1992, repossession by lenders exceeding 75,000.

Those worse placed in the current housing market downturn are borrowers who took out 100% mortgages to get onto the housing ladder.

According to the Council of Mortgage Lenders, around 30,000 home owners have opted for 100% mortgages since the start of 2007.

Latest figures from Nationwide show that house prices have fallen by over 7% since their peak last October.

The building society has recorded house price falls for the past eight months, putting the price of the average home at £172,415 compared with £186,044 in autumn 2007.

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News posted: July 7, 2008

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