Negative equity not a problem
Today's news that there are around 900,000 home-owners currently with some degree of negative equity, the majority of these - around two thirds - face only modest shortfalls of less than 10% according to the Council of Mortgage Lenders (CML).
This equates to around £6,000 for those first-time buyers with negative equity, and £8,000 for other home-buyers and is a problem spread broadly across all age groups and those at differing points on the housing ladder.
The new research by the senior statistician at the CML shows that at the depth of the last housing market recession in 1993, 1.5 million households or more were estimated to have negative equity. Most sat tight, saved, continued to pay their mortgages and eventually recovered their equity position. And, according to the CML, this is what most of today's borrowers with reduced or negative equity are also doing.
While reduced and negative equity are likely to constrain the ability of affected households to move house, the overall scale and impact of this for the market as a whole needs to be kept in perspective - even in today's weaker market, the CML estimates that home-owners still have around £2.1 trillion of un-mortgaged housing equity.
The CML's head of research commented: "Although negative equity has resurfaced as house prices have fallen, one big difference from the early 1990s downturn is that it is less concentrated among young, first-time buyers, and more evenly spread across wider age groups and those at different points on the housing ladder.
"Negative equity will contribute to subdued property turnover, but otherwise should have few adverse effects for the majority of households affected. Where people needs to move house for job or other priority reasons, lenders can often be flexible to existing borrowers with low or negative equity, as long as their financial position is sound and they have a good payment track record. Otherwise, sitting tight and building up savings or overpaying on the mortgage are the strategies most borrowers are likely to adopt. It should be easier for households to rebuild their equity position than in the early 1990s, as low interest rates on their mortgage can help them to save or overpay more quickly."
I say "If you are affected by negative equity, and want or need to sell your property, then negative equity is a huge problem. If you do not have additional funds to use for a deposit ( and don't forget that deposits now been to be much higher that was required 12-24 months ago), it hits home hard. However, there are some additional ways to raise funds that can be used as a deposit. As ever, if this situation affects you, then I urge you to contact me to consider your options in a pragmatic way. My contact details are above on the right hand side."
This equates to around £6,000 for those first-time buyers with negative equity, and £8,000 for other home-buyers and is a problem spread broadly across all age groups and those at differing points on the housing ladder.
The new research by the senior statistician at the CML shows that at the depth of the last housing market recession in 1993, 1.5 million households or more were estimated to have negative equity. Most sat tight, saved, continued to pay their mortgages and eventually recovered their equity position. And, according to the CML, this is what most of today's borrowers with reduced or negative equity are also doing.
While reduced and negative equity are likely to constrain the ability of affected households to move house, the overall scale and impact of this for the market as a whole needs to be kept in perspective - even in today's weaker market, the CML estimates that home-owners still have around £2.1 trillion of un-mortgaged housing equity.
The CML's head of research commented: "Although negative equity has resurfaced as house prices have fallen, one big difference from the early 1990s downturn is that it is less concentrated among young, first-time buyers, and more evenly spread across wider age groups and those at different points on the housing ladder.
"Negative equity will contribute to subdued property turnover, but otherwise should have few adverse effects for the majority of households affected. Where people needs to move house for job or other priority reasons, lenders can often be flexible to existing borrowers with low or negative equity, as long as their financial position is sound and they have a good payment track record. Otherwise, sitting tight and building up savings or overpaying on the mortgage are the strategies most borrowers are likely to adopt. It should be easier for households to rebuild their equity position than in the early 1990s, as low interest rates on their mortgage can help them to save or overpay more quickly."
I say "If you are affected by negative equity, and want or need to sell your property, then negative equity is a huge problem. If you do not have additional funds to use for a deposit ( and don't forget that deposits now been to be much higher that was required 12-24 months ago), it hits home hard. However, there are some additional ways to raise funds that can be used as a deposit. As ever, if this situation affects you, then I urge you to contact me to consider your options in a pragmatic way. My contact details are above on the right hand side."
Labels: negative equity
posted by Des Tourick 1st Call 4 Mortgages at
13:40
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