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Thursday 12th of February 2009
April 3, 2008

Negative equity haunts three million UK households


by Gill Montia
”Negative

Liberal Democrat MP, Vince Cable, is warning that three million families (one in four UK households) could face negative equity in the next 12 months.

Mr Cable was expounding an analysis by City property experts and described the prediction as “highly plausible”, rather than alarmist.

It is based on the assessment that there are around three million borrowers in the UK whose mortgages currently account for 90% or more of the value of their homes.

The warning comes as many of the most competitive mortgages in the market have been scrapped by lenders inundated with new applications.

Yesterday, Lehman Brothers, which operates in the sub-prime sector, axed its entire range while the Co-op Bank withdrew all its two-year fixed-rate home loans.

First Direct, part of the HSBC group, and a number of the smaller building societies are turning away new customers.

Meanwhile the Halifax, the UK’s largest mortgage lender, has warned that its mortgage costs are set to rise.

The lender’s finance director, Mike Ellis, stated: “No one can be in any doubt that the cost of medium-term wholesale funds has risen, and that this will be passed onto the customer.”

Close to 11,000 mortgage deals have disappeared since the start of the credit crunch, last summer.

The latest figures from the Bank of England show that only 73,000 people managed to take out a mortgage for a house purchase in February, compared to 120,000 in February of 2007.

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