One in six mortgages in negative equity

We’ve been hit with a barrage of mortgage-related data over the last week or so. The likes of the British Bankers Association, Council of Mortgage Lenders and the National Association of Estate Agents (that’s the BBA, CML and NAEA if you like your acronyms) have all been reporting on the current state of the housing and mortgage market – the combined news suggests that buyer interest in the housing market is continuing to pick up, but the overall mortgage market (particularly remortgaging) is still subdued.

The latest report to hit the Headlines is a particularly gloomy one from the rating agency Fitch, which says that almost one in six borrowers in the UK are now in negative equity. The figures show that the severity of the situation varies from region to region – the East Midlands is the region with the highest proportion of loans in negative equity, whereas Scotland is the lowest.

This interactive map from the Guardian shows how different parts of the UK are affected. With house prices down by around 14% annually, this latest news is unsurprising – especially when you consider that just before house prices started to fall, buyers were able and willing to buy a home with little or even no deposit (how quickly things change). Whilst the idea of being in negative equity (when the amount of your outstanding mortgage is more than the current value of your home) is a frightening one, we always urge people not to panic. It’s worth remembering that negative equity only becomes a real issue when you try to sell or remortgage.

In the meantime, if you stay in your property and continue to meet your mortgage payments then you could quite easily move back out of negative equity without really knowing about. This is where the current situation looks more promising than the early 90s – the last time that negative equity was prevalent in the UK.

With interest rates at historic lows, the cost of maintaining a mortgage is thankfully lower for most people than it was then. In fact, if your current mortgage payments are easily affordable, then you could consider making overpayments to try and counteract falling house prices. What’s not as promising is the issue faced by many more people who, although not technically in negative equity, are unable to move or remortgage due to the lack of mortgage deals available to borrowers with small deposits. This is a situation that will hopefully improve before too long. We’re interested to hear your views on the subject of negative equity – is it something you’re worried about?  Have you been affected it by it already?

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