100,000 mortgage holders escape negative equity trap

| October 30, 2012
100,000 mortgage holders escape negative equity trap

New figures from the Council of Mortgage Lenders (CML) reveal that the number of borrowers in negative equity fell 13 per cent to 719,000 between the first quarter of 2011 and the first quarter of 2012.

The number of borrowers paying a mortgage greater than the value of their property fell despite a further small decline in house prices.

Although property prices have been falling in most parts of the country, London and south east England have bucked the trend and an increase in property prices in these areas has contributed to the improved negative equity figures.

“Most mortgage holders are in a reasonably comfortable equity position, but the house price falls since 2007 have eroded the equity position of households,” the CML said.

“We estimate that around 719,000 households currently have some negative equity, but the encouraging news is that this represents a 13% decline in the number of borrowers with negative equity from our previous estimate of 827,000 in first quarter of last year.”

People who bought their homes between 2005 and 2008, when property prices were booming, are most likely to be affected by negative equity.

The problem is most severe in Northern Ireland where the property market has experienced a sharper boom and bust cycle than in other UK regions.

Around 35 per cent of mortgage holders in Northern Ireland are in negative equity.

The north west of England, and Yorkshire and Humberside, have 15 per cent of mortgages in negative equity.

At the other end of the scale the south east of England and Greater London have 5 per cent and 6 per cent of mortgages in negative equity respectively.

Property analytics company Hometrack reported that UK property prices fell by 0.4 per cent in October, on a year-on-year basis.

Property prices are now at their lowest level for two years, Hometrack said.

The fall has been attributed to sellers reducing asking prices on homes that have been on the market for some time.

However, property sales in October 2012 were 9.2 per cent higher than in October 2011.

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  1. Simon says:

    What this one overlooks in particular is that a large number of buyers in 2007 will have made deposits. If you near in mind a 10-25% deposit, this would suggest that NOT ONLY have these people found their properties losing value at a faster rate than they are making mortgage payments, but many of them will ALSO have lost huge chunks of their deposits. On top of that, you have property prices losing value in terms of inflation.

    Net effect.. vast numbers of people sorely out of pocket. Renting may have been called a waste of money of that time, but quite frankly it’s a less costly waste of money.