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| Negative equity stops home moves | Negative equity stops home moves |
| (about 2 hours later) | |
| Falling house prices mean that two million households have either negative equity, or too little equity to finance a house move, lenders have said. | Falling house prices mean that two million households have either negative equity, or too little equity to finance a house move, lenders have said. |
| Negative equity is the situation where someone's house has become worth less than their mortgage. | Negative equity is the situation where someone's house has become worth less than their mortgage. |
| Research by the Council of Mortgage Lenders (CML) said the problem would restrict the number of home sales. | Research by the Council of Mortgage Lenders (CML) said the problem would restrict the number of home sales. |
| But it said two thirds of the 900,000 homes in negative equity had only a modest shortfall of less than 10%. | But it said two thirds of the 900,000 homes in negative equity had only a modest shortfall of less than 10%. |
| That equated to an average of about £6,000 for first-time buyers in that situation, and £8,000 for the other home owners. | That equated to an average of about £6,000 for first-time buyers in that situation, and £8,000 for the other home owners. |
| "Although negative equity has resurfaced as house prices have fallen, one big difference from the early 1990s downturn is that it is less concentrated among young, first-time buyers, and more evenly spread across wider age groups and those at different points on the housing ladder," said Bob Pannell, head of research at the CML. | "Although negative equity has resurfaced as house prices have fallen, one big difference from the early 1990s downturn is that it is less concentrated among young, first-time buyers, and more evenly spread across wider age groups and those at different points on the housing ladder," said Bob Pannell, head of research at the CML. |
| "Negative equity will contribute to subdued property turnover, but otherwise should have few adverse effects for the majority of households affected," he added. | "Negative equity will contribute to subdued property turnover, but otherwise should have few adverse effects for the majority of households affected," he added. |
| Small deposits | Small deposits |
| With lenders still restricting their lending because of a shortage of mortgage funds, few are currently prepared to accept a deposit of only 10% from anyone buying a house. | |
| Negative equity... only surfaces as a problem if households need to move, or are also experiencing repayment difficulties CML | Negative equity... only surfaces as a problem if households need to move, or are also experiencing repayment difficulties CML |
| Recent figures from the financial information service Moneyfacts showed that there were currently only 106 mortgage deals requiring a deposit of 10% or less, while more than two thirds of the 1,485 deals available asked customers to put up a deposit of at least 25%. | |
| The impact is that even people who still have some limited equity in their homes, but less than 10%, are unlikely to be able to move. | The impact is that even people who still have some limited equity in their homes, but less than 10%, are unlikely to be able to move. |
| The CML estimated that there are about 600,000 mortgage holders who have less than 5% equity in their homes, plus another 500,000 whose equity would amount to a deposit of more than 5% but still less than 10%. | The CML estimated that there are about 600,000 mortgage holders who have less than 5% equity in their homes, plus another 500,000 whose equity would amount to a deposit of more than 5% but still less than 10%. |
| Thus about two million homeowners in total could not raise a 10% deposit for a new mortgage simply by selling their current homes. | Thus about two million homeowners in total could not raise a 10% deposit for a new mortgage simply by selling their current homes. |
| 1990s comparison | 1990s comparison |
| The CML carried out its research by looking at data supplied by its members. | The CML carried out its research by looking at data supplied by its members. |
| With house prices dropping by about 18% since the middle of 2007, the fall in prices has already outstripped the national price drop experienced during the early 1990s house price crash. | With house prices dropping by about 18% since the middle of 2007, the fall in prices has already outstripped the national price drop experienced during the early 1990s house price crash. |
| But the 900,000 estimated to be in negative equity now are fewer in number than the 1.5 million estimated to have been in this position more than a decade and a half ago. | But the 900,000 estimated to be in negative equity now are fewer in number than the 1.5 million estimated to have been in this position more than a decade and a half ago. |
| Of the households currently in negative equity, about 270,000 have a shortfall of between 10% and 20%, and about 30,000 have a shortfall of 20% or more. | Of the households currently in negative equity, about 270,000 have a shortfall of between 10% and 20%, and about 30,000 have a shortfall of 20% or more. |
| In those most extreme cases their negative equity amounts to an average £28,000 for first-time buyers and £37,000 for other home owners. | In those most extreme cases their negative equity amounts to an average £28,000 for first-time buyers and £37,000 for other home owners. |
| Despite this, the CML argues that it is myth that there is a strong link between negative equity and mortgage repayment problems. | Despite this, the CML argues that it is myth that there is a strong link between negative equity and mortgage repayment problems. |
| "Payment problems are typically associated with unexpected spending commitments, reduced income and changes in household circumstances," the CML said. | "Payment problems are typically associated with unexpected spending commitments, reduced income and changes in household circumstances," the CML said. |
| "Negative equity, on the other hand, only surfaces as a problem if households need to move, or are also experiencing repayment difficulties," it added. | "Negative equity, on the other hand, only surfaces as a problem if households need to move, or are also experiencing repayment difficulties," it added. |
| Are you in negative equity? How does this affect you? Send your experiences using the form below: | Are you in negative equity? How does this affect you? Send your experiences using the form below: |
| A selection of your comments may be published, displaying your name and location unless you state otherwise in the box below. | A selection of your comments may be published, displaying your name and location unless you state otherwise in the box below. |
| The BBC may edit your comments and not all emails will be published. Your comments may be published on any BBC media worldwide. Terms & Conditions | The BBC may edit your comments and not all emails will be published. Your comments may be published on any BBC media worldwide. Terms & Conditions |