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Negative equity should be viewed within "the broader picture"

04/07/2008

Homeowners fearing negative equity should look at the situation in the context of past price increases, an expert has said.

GE Money Home Lending has released figures showing negative equity should not be a great concern, as "equity cushions" were created when property prices hit record highs in the past few years.

An owner of an average London property bought in 1995, for example, would only experience negative equity if the price decreased by three quarters (72 per cent), according to the report.

Even houses bought with an average deposit as recently as last year are unlikely to see negative equity, as the analysis indicates a "cushion" is provided for a drop of up to a fifth.

Gerry Bell, head of mortgage marketing, GE Money Home Lending, urged homeowners "to look at the broader picture".

"Over the past decade homeownership has delivered fantastic returns for many borrowers and we would need to see unprecedented falls in property prices for the average home owner to be severely impacted," he said.

House prices have fallen by 6.3 per cent in the twelve months, according to information released by the Nationwide building society, but remain four per cent higher than two years ago.

More than 4 million fear they`ll be made redundant 16/12/2010 - According to R3`s quarterly personal debt tracker, more than 4 Consumers took on more mortgage debt in July 26/08/2010 - Consumers took on £2bn more mortgage debt than they repaid Debts called in by parents 26/08/2010 - According to research, `the bank of Mum and Dad` is Teenagers `scared of debt` 19/08/2010 - Nearly two thirds of teenagers are `scared` of debt, according