Thousands facing negative equity

brit1234

Thousands facing negative equity


By Richard Scott

More than 23,200 people who took out 100% mortgages in the year to 31 March could face negative equity, according to figures obtained by the BBC.

Falling house prices mean the amount borrowed could be greater than the value of their properties.

The data from the Council of Mortgage Lenders comes as figures show the housing market is slowing down further.
Separate housing figures suggest the number of transactions per estate agent has hit a 30-year low.
These figures from the Royal Institution of Chartered Surveyors come as banks are imposing stricter requirements on borrowers, in the wake of the credit crisis.

Turned away
If a house loses its value it is not necessarily a problem unless the owner has to move, or cannot afford to pay the mortgage.

In a rising market banks are prepared to lend 100% mortgages as there is little risk of them not getting their money back.
But as prices have been falling, the risks have increased and lenders are turning borrowers away if they don't have a deposit.

There is a warning that the situation may deteriorate further.

"House prices are down 6% in just the last five months, and the worst of the credit crisis - all that still lies ahead," said Michael Saunders, head economist at Citigroup.
He had predicted that house prices would fall by 15% in 2008 and 2009 but now he says that drop could be even greater.

http://news.bbc.co.uk/1/hi/business/7445324.stm

1. I love the way they are always downgrading their predictions.
2. Slight rises
3. Flat
4. Small drop and picking up by the end of the year.
5. Small drops this year and next
6. Bigger than expected drops for the foreseeable future.

And all of a sudden 50% falls are being spoken more about by experts.:exclamati

IveSeenTheLight

brit1234 wrote: »

And all of a sudden 50% falls are being spoken more about by experts.:exclamati

Can you provide any quotes of experts predicting 50% Actual price falls, or are they real term price falls?

Only "Actual House Prices" will be used when any lendor is calculating what can be lent

esbo

The average of house prices is probably about 4 times income, 3 times at the bottom and 5 times at the top, i would say it will take a couple of years for things to pick up,I mean, what do we have, a 6% drop so far and 3% (lol more like 15% it seems) inflation. So thats 10% already, maybe similar next year, that would be 20%+ and as wages tend to above inflation you can add a bit more for your mulitples, + the none-buyers will have held off and saved more.

I think the 50% figure is overblown, it won't be nowhere near as bad as that, a year and a half and things will look much better, houses will look a lot cheaper and people will be sniffing around and the banks (if there are any left :rotfl:) will be much happier to lend.

Look at it from a buyers perspective say there is a £200,000 house which is out of your range, if it drops 20% it will be £160,000, now...to go from a £160,000 which is what you could afford, to £200,000 is a 25% increase in your purchase power, you can now afford a house 25% 'better' than your previous expectations.

If we go on...you love maths don't ya :T (well you should have paid attention at school then!!)
Take a 50% drop to £100,000, if previously you could afford a house worth £100,000, you can now buy a house which was previously valued at £200,000, which was probably beyond your wildest dreams.

So that's what I am saying a 50% drop, looked at from the the buyers perspective is a 100% increase in his purchase power ie he could actually buy 2 of the houses he way previously looking at. Similarly a 33% drop correspondes to a 50% increase from the buyers purchasing power perspective.

So that's what I am saying, it won't be nearly as bad as some are making out.

And finally, house price deflation is actually a good thing because you can afford a better house. You might feel better in your one bedroom flat worth a fortune, but that in my opinion would be more than offset by the fact that you can now afford a 4 bedroom detatched house (which is 'worth nowt')!!!

Oh happy days are here again........cheer up it's not the end of the world :beer:

esbo

People who think prices will drop 50% are living in cloud cuckoo land.

Lotus-eater

esbo wrote: »

People who think prices will drop 50% are living in cloud cuckoo land.

I don't think it will happen, but I'm not daft enough, to never say never.
I know it keeps being said, but those who can't remember the late 80's shouldn't make predictions on what they have learnt since then. Public perception can change very easily. That £200 000 house that looks cheap when it gets to £160 000 now, suddenly it still looks very expensive two years down the line when it actually is at £159 999

wisbech_lad

Prices dropped 60%+ in Hong Kong at one stage...

inmypocketnottheirs

Where's carolt?

slipthru

brit1234 wrote: »

1. I love the way they are always downgrading their predictions.
2. Slight rises
3. Flat
4. Small drop and picking up by the end of the year.
5. Small drops this year and next
6. Bigger than expected drops for the foreseeable future.

And all of a sudden 50% falls are being spoken more about by experts.:exclamati

There just easing us in nice and slowly.

rjm2k1

What an utterly pointless report, yes of course if people took out a mortgage recently and the price dropped they will be "in negative equity", it's a no-brainer, does it really justify a journalist having a job to write about such an obvious thing? Scaremongering at it's best.

m00m00

the vast majority of people who took out 100%+ loans took them out on short term fixed rates. Negative equity is therefore likely to be a very big deal for them in the next 12-18 months

Dan:_4

rjm2k1 wrote: »

What an utterly pointless report, yes of course if people took out a mortgage recently and the price dropped they will be "in negative equity", it's a no-brainer, does it really justify a journalist having a job to write about such an obvious thing? Scaremongering at it's best.

Its desperation from Brit.