Almost one in 10 in negative equity

Apr 18 2009 by Liz Hands, The Journal

ALMOST one in 10 homes in the North is in negative equity, research into the knock-on effects of the recession revealed yesterday.

The bleak figure is down to falling house prices as the credit crunch continues to bite, the Council of Mortgage Lenders (CML) said.

Nationally, around a million home owners are thought to be in negative equity – the largest number since the last recession in the days of the 1993 Conservative government.

New research suggests drops in property values left around 900,000 people with a home which had a value less than their mortgage debt at the end of 2008.

The number may rise as high as 1.18 million, the CML, which represents most major lenders, said.

James Tatch, a senior statistician at the CML, suggested around two-thirds of those currently suffering face only modest shortfalls of less than 10%. This equates to around £6,000 for first-time buyers and £8,000 for other home owners.

His report said around 13% – 900,000 – of those who took out mortgages between the second quarter of 2005 and the end of 2008 had negative equity. Those who took out mortgages in the second and third quarters of 2007, at the peak of house prices, were most likely to be affected.

The report said further falls in house values were likely although the areas worst affected by negative equity are different from those which suffered 16 years ago.