Up to 900,000 homeowners are facing negative equity as plummeting house prices take their toll on the UK property market, it has been revealed.
Prices have dropped by 18 per cent from an average of £186,000 to £150,000 since November 2007 and this, the Council of Mortgage Lenders says, means more people now have mortgages larger than the value of their homes.
This is similar to the last property slump during the early 1990s but, although price drops then were less severe, the number of homes with negative equity was much higher at 1.5 million.
“Another big difference is that is it less concentrated among young, first-time buyers and more evenly spread across wider age groups and those at different points on the property ladder,” says Bob Pannell, head of research at the CML.
The problem also varies from region to region and the percentage of homeowners suffering negative equity is highest in the north (9.2 per cent), Yorkshire and Humberside (6.7 per cent) and the East Midlands (5.4 per cent) compared to the national average of 4.8 per cent.
So how big are the drops? According to the CML negative equity is currently a moderate problem. Two thirds of those with mortgages bigger than their property’s value face an average shortfall of £6,000 for first time buyers and £8,000 for home movers.
