Owners 'owe more than home worth'

Last Modified: 05 Jul 2008
Source: PA News

Nearly 150,000 homeowners who have taken out mortgages since the start of last year are now in negative equity, new research indicates.

One in eight of the 1.2 million people who bought a property in this period now owe more than their home is worth, a study by CACI for the Daily Telegraph found.

The analysis suggests that 360,000 mortgage holders could be in negative equity by the end of this year if house prices fall by 20%, as some economists fear possible.

Negative equity caused misery for many homeowners in the early 1990s, leading to repossessions and people being forced out of their homes.

People on 100% mortgages are particularly vulnerable to the problem when property prices drop because they do not have the cushion of a deposit.

Recent figures from the Council of Mortgage Lenders showed that 23,200 of these loans were taken out in the year to the end of March.

Nationwide said this week that house prices fell for the eighth month in a row during June, with 6.3% wiped off the value of the average home during the past 12 months.

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