Almost one million home owners in negative equity, says CML
Almost one million home owners are in negative equity, the Council of Mortgage Lenders has suggested.
By Myra Butterworth, Personal Finance Correspondent
Last Updated: 7:54AM BST 18 Apr 2009
It claimed that about 900,000 home owners currently have some degree of negative equity, where the value of their home is less than their mortgage.
Bob Pannell, head of research at the CML, said negative equity had "resurfaced" as house prices have fallen and that it "will contribute to subdued property turnover".
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However, the CML said the majority of those in negative equity - around two thirds - face only modest shortfalls of less than 10 per cent, equating to around £6,000 for those first-time buyers with negative equity, and £8,000 for other home-buyers.
The CML's estimate is less than some economists' predictions that nearly four million home owners are already suffering from the predicament. And it is still less than the 1.5 million households estimated to have negative equity at the depth of the last housing market slump in 1993.
It said: "Falling house prices have once again raised the prospect of negative equity for borrowers. Although negative equity may reduce a household's coping strategies should they encounter payment difficulties, it does not of itself affect the ability to keep up mortgage payments or create a risk of repossession."
Comment: Probably not dire. Once the housing problems settled and confidence returns, these negative equities will disappear. Should inflation sets in, the losses may turn to gains.
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