There are almost 1,000,000 potential homeowners stuck with a mortgage with a higher value than their house as housing prices plummet.
An investigation found the possibility of negative equity is looming over their heads of potentially 1 million homeowners who pay deposits of less than 15% before 2008.
This difficult for the experts to make exact predictions however many concurrent is similar reduction N home values could leave 1.02m and 1.4m householders in negative equity.
A lot of homeowners are looking at being unable to the mortgage or get a new home without having considerable money in savings. If they are lucky enough to be able to move the reduction in equity means they will be unable to get the best mortgage deals. According to the Halifax prices are 19% lower than 2007. This is knocked off £39,000 from the average house price.
The Halifax also reported that housing prices fell 1.4% last month as well. Depending on the region some house prices have dropped as much as 11% since last August.
2011 has been a slightly better year in Scotland Wales and London over the long term economists suggest those places will fall further. Some pessimistic predictions even believe has prices could fall as much to 20% by 20 2012.
The biggest mortgage lender in the UK Lloyds TSB said that 150,000 of their mortgage owners were in negative equity. And the Bank of England suggests as much as 350,000 could be in negative equity throughout the UK.
Is it possible the market is at a tipping point?
Small falls in house prices don’t take many people into negative equity but at some point, when the house value dropped so far, the negative effects can happen suddenly. Generally banks and building societies don’t release such information on the number of current borrowers on the edge of negative equity but statistics show that 4.5% of current mortgages are worth more than the current value of the homes. And 15% own a home which has a loan between 80% and 100% the value of the property, this demographic is highly sensitive to any changes in house prices.
With pressure to put up interest rates from rising inflation this could almost be the perfect storm and the horrible outcome for many new first-time buyers. This being said with the elimination of 100% mortgages and tightening on 95% mortgages lending not many people can put themselves in such a precarious situation. Only 6000 mortgages were granted to people with less than 10% equity in the first four months of this year which makes up only 2% of all the mortgages given.
So before you look for the best mortgage deals please take a minute to look at the risks involved and questioned whether you really do need a mortgage because the next 5 to 7 years is going to be a very uncertain time in the housing market.