At the moment it is estimated that more than 7% of all home loans are in negative equity. Unfortunately, market analysts believe that number is soon to more than double based on tax lending and falling prices of homes.
With 800,000 home mortgages currently in negative equity, there is concern that property prices could fall another 10% and if this were to happen, the number of home mortgages in negative equity can more than double. This would place the number of UK homes in negative equity at almost 2 million which is unprecedented since the housing crash of the early 1990’s.
Data compiled by Homeloan Management Ltd shows that worst hit will be homeowners in the North West of England and Northern Ireland if home prices continue to fall. This would equate to one of three homes in Northern Ireland which would be worth less than currently owed on the mortgage.
And further, the hardest hit age group will be homeowners under the age of 40 as they have, for the most part, just recently purchased their homes and have not had time to build any substantial equity before prices began dropping.
According to the chief finance officer for Homeloan Management Limited, this data indicated just how vulnerable households in the UK are to falling home prices which have already fallen almost 18%. There are various forecasts as to the future of home prices, but he feels UK homeowners need to be prepared for the worst, to brace themselves for dipping prices.
Although the largest mortgage lender in the UK, Halifax, states that house prices have remained consistent over the past quarter, they have dipped 2.6% over the past year. Further analysis reveals that if prices drop by just two and a half percent then at least 1 million UK homeowners will have a mortgage which is greater than the value of their home. The number of people affected rises relative to the drop in home prices.
