Hundreds of thousands of homes in negative equity Loan Glossary

Hundreds of thousands of homes in negative equity

According to a recent report by High Street banking giant HSBC, more than 350,000 homeowners are now in negative equity, as the property market continues experiencing turbulence. It is thought that up to 360,000 homeowners who purchased their homes in 2007 are now stuck in their homes to due being in negative equity. Plummeting property prices and restrictive lending have taken their toll on those who purchased homes just prior to the global financial crisis.

Officials from HSBC said that although not all of these homeowners were in negative equity as such, many were in a situation where they did not have enough equity in their homes to pay a 10 percent deposit on a new mortgage or home, pay stamp duty and deal with other moving costs.

First time buyers are said to have been affected particularly badly. Figures show that in 2007 the average deposit put down by first time buyers was 10 percent and with the average property price at that time being £160,000 this gave equity of £16,000. However, with prices since then having plummeted most of this equity has been wiped out, leaving first timers high and dry. There have also been regional variations that affect the level of negative equity that homeowners have found themselves in, as prices is some areas have tumbled far more quickly than in others.

An HSBC official said: “These findings highlight the fact that first-time buyers can no longer rely on rising house prices to provide them with the deposit they need for their second purchase. They need to save or make overpayments on their existing mortgage if they want to move up the housing ladder.”

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