Negative equity threat faces nearly two million
September 15, 2008
The news has been filled with month on month house price falls over recent months, and most people are aware that the value of properties in the UK has been steadily falling, with some reports indicating that house prices are now down to the same level that they were in August 2006. This has left many people in fear of falling into negative equity, which is where they owe more on their property than the property is actually worth.
One report has indicated that around 1.7 million homeowners are at risk of falling into negative equity by next year if house prices continue to fall at the same pace as they have been over recent months. Most industry officials have predicted that house prices will continue to fall next year and possibly the year after as well. There are some groups that will be profoundly affected if this happens, as it means that the equity in their property will keep falling and could eventually run into negative figures.
One industry official from Standard and Poor, which published the report, stated: “The downward trend in UK house prices now seems well established, and we expect prices to continue falling in the near term.”
Other officials have said that by 2010 house prices could fall by up to 20% or more, and that this could result in over two million people being pushed into negative equity, mirroring the dark days of the early 1990s.
There are certain groups that have been placed at higher risk of falling into negative equity than others, and amongst those thought to be at increased risk are those that purchased properties over the past couple of years when house prices were still high, those that borrowers from sub-prime lenders, and those that have taken out buy to let mortgaged. Already there are thought to be around 70,000 homeowners in negative equity.
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