Falling house prices means over 20,000 facing negative equity

Permalink: Falling house prices means over 20,000 facing negative equity
by Kay Murchie

With the continued slide in house prices, figures from the Council of Mortgage Lenders suggest that there is likely to be an increase in the number of people whose mortgage is worth more than their property.

In the 12 months to the end of March, over 23,200 homeowners who took out a 100% mortgage could fall into negative equity, according to the figures.

Last week, US investment bank Citigroup said since house prices started to fall late last year, 250,000 Britons are in negative equity.

The US bank believes that property prices could decline by as much as 15% by the end of 2008. Such a drop would leave at least a million homeowners in negative equity.

Furthermore, back in April Liberal Democrat Treasury spokesperson Vince Cable, predicted that three million households could fall into negative equity over the next 12 months.

All lenders have withdrawn their 100% plus mortgage products since property prices have fallen and many lenders have raised interest rates and are turning borrowers away if they do not have a deposit.

In related news, figures from the Royal Institution of Chartered Surveyors (Rics) have shown that the number of transactions per estate agent has hit a 30-year low.

During the months of March, April and May, Rics reported that an average of 17.4 transactions had been completed, down from 18.5 in the 3 months to April. This represents the lowest figure since records began in January 1978.