The Return of Negative Equity as House Prices Fall Again?

The Council of Mortgage Lenders has said that according to the information collected from their members that this December shows a fall in house prices in real terms, unprecedented since the early 1990s.

This is further bad news for those facing repossession.

Negative Equity Graph

Not only are the rises in inter bank lending interest rates causing problems for those on sub prime mortgages and those trying to remortgage, but the drop in house prices and fall in sales also means that for many homeowners the equity left in their homes is shrinking for the first time in many years, and heading towards the dreaded negative equity last seen in the lat 1980s.

Negative equity can occur when the amount of money mortgaged against the property is greater than the value of the property.

For those on an 85% mortgage it means that house prices need to fall 15% to allow that to happen.

But for the tens of thousands on 95% mortgages, it means that if your house was worth £200,000 and your mortgage was £190,000, it only takes a relatively tiny fall of £10,000 in the market value to put you in the negative equity bracket.

If you then face problems paying your monthly mortgage you will literally have run out of equity to remortgage.

For those on 100% mortgages acquired in the last 12 months ANY fall in prices can mean instant negative equity.

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One Response

  1. […] January 11, 2008 · No Comments The Return of Negative Equity as House Prices Fall Again? « Stop Repossession Org UK […]

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