Is negative equity likely?

natwill_3

I have been reading alot on the HPC website and am starting to panic slightly. I live in London and have a flat valued at £400k in April 2007, the mortgage is repayment and about £205k, my OH says based on what happened in the late 80's and early 90's the value could halve and I would be in negative equity?. He wants me to sell up, however if I did my rent round here would be higher than I pay right now and I am worried that as now self employed I would find it hard to pass credit checks etc.

Anyone been through the last downturn, did any places really drop 50%?.

Its a victorian conversion, 2 bed 2 bath garden flat in west london.

Thanks

Stompa

http://www.moneyforums.co.uk/post-3290.html

adr0ck

natwill wrote: »

Anyone been through the last downturn, did any places really drop 50%?.

No..........................

Hoario54

natwill wrote: »

I have been reading alot on the HPC website and am starting to panic slightly. I live in London and have a flat valued at £400k in April 2007, the mortgage is repayment and about £205k, my OH says based on what happened in the late 80's and early 90's the value could halve and I would be in negative equity?. He wants me to sell up, however if I did my rent round here would be higher than I pay right now and I am worried that as now self employed I would find it hard to pass credit checks etc.

Anyone been through the last downturn, did any places really drop 50%?.

Its a victorian conversion, 2 bed 2 bath garden flat in west london.

Thanks

Negative equity is a serious possibility for many who have bought over the last five years, probably more so for those who have bought over the last two years.

However, firstly you do live in London which is a law unto itself and secondly you have almost 50% equity currently (which means nothing if you can't sell at that valuation).

I would be far more worried if I lived outside London (but in the South East) and had 20% - 30% or less equity in my property.

Don't forget though, negative equity is only a problem if you need to sell. Have a think about your long term plans (were do you see yourself in 5 years?) before making a decision.

If you want to be in a house, possibly out of the capital then cashing in now may be a wise move.

pinkshoes

Well how long are you planning on keeping the flat, and can you keep up your mortgage repayment, even if interest rates go up to say 12%

If it's just an investment to you, and you don't mind living in rented accomodation, then sell, but if it's a home that you plan on living in for a long time, then I'd stay.

Selling then paying more in rent that you are in mortgage repayment seems somewhat daft. If you stay, then when you reach 60 years old you won't have to worry about paying rent as the property will be mortgage free. If you sell and rent, and don't buy again (prices MIGHT go up, no one can predict this...), then you'll be spending a huge chunk of your pension on rent.

Personally I can't put a price on the value of a "home"... (having rented for 10 years, I never want to rent again!)

natwill_3

You mean they didn't drop 50%?

natwill_3

Hoario54 wrote: »

Negative equity is a serious possibility for many who have bought over the last five years, probably more so for those who have bought over the last two years.

However, firstly you do live in London which is a law unto itself and secondly you have almost 50% equity currently (which means nothing if you can't sell at that valuation).

I would be far more worried if I lived outside London (but in the South East) and had 20% - 30% or less equity in my property.

Don't forget though, negative equity is only a problem if you need to sell. Have a think about your long term plans (were do you see yourself in 5 years?) before making a decision.

If you want to be in a house, possibly out of the capital then cashing in now may be a wise move.

Hi, I will be the capital for next few years as that is where my work is, one day want to move to the country, surrey or somewhere with good transport links but not yet.

natwill_3

pinkshoes wrote: »

Well how long are you planning on keeping the flat, and can you keep up your mortgage repayment, even if interest rates go up to say 12%

If it's just an investment to you, and you don't mind living in rented accomodation, then sell, but if it's a home that you plan on living in for a long time, then I'd stay.

Selling then paying more in rent that you are in mortgage repayment seems somewhat daft. If you stay, then when you reach 60 years old you won't have to worry about paying rent as the property will be mortgage free. If you sell and rent, and don't buy again (prices MIGHT go up, no one can predict this...), then you'll be spending a huge chunk of your pension on rent.

Personally I can't put a price on the value of a "home"... (having rented for 10 years, I never want to rent again!)

Hi,

Thanks for that, yes if rates went up to 12% I could pay although it would be hard, its a home and I have pets so terrified of renting again.

Badger_Lady

I don't think you have much to worry about - although, with that amount of money sunk into the property, I would consider seeing a financial adviser and discussing the possibility of investing that cash elsewhere to make better use of it..? I'm not finance-savvy so can't give any examples, but there may be a cleverer way to use your equity that may or may not involve selling.

Personally, I've only got 5% equity in my home (similarly to many people), so negative equity is a very real possibility for me. But since I've got a long-term fixed rate, easily affordable repayments and no plans to sell during the next 7 years, it's not a big problem

adr0ck

average uk prices

1970 4,975
1975 11,787
1980 23,596
1985 31,103
1990 59,785
1991 62,455
1992 60,821
1993 61,223
1994 64,755
1995 65,641
1996 70,534
1997 75,959
1998 81,991
1999 92,715
2000 101,466
2001 112,867

Kez100

The figures above hide one important matter in this - they need the annual rate for 1985 to 1990. Without that, the worst drop cannot be seen

Yes, we went through the last downturn.

We bought in 1991 after the biggest falls had already happened for 52250. Sold in 1994 for 48000. Had to fund our way out of negative equity to move.

We bought, in 1994, a house for 75k that had been on the market without a buyer for quite a few years starting at 120k. Not quite a drop of 50%, but it did get close.