Shocking statistics from the housing market were released this month which showed that 1.7 million UK homeowners are currently affected by negative equity. The news came as part of new housing research from Homeloan Management Limited (HML). Of that 1.7 million, more than 800,000 homeowners (7.3% of all households with a loan) are currently paying off a mortgage which is higher than the value of their property, whilst the rest of the 1.7 million appear to be staring negative equity square in the face.
These issues are not helping the recovery of the housing market, and are also affecting the amount of debt that many homeowners find themselves in today. This data has not factored in unsecured or outstanding debts these households have, which means they will find it a great deal harder to move away from their current property, and are sitting on a property which is continually depreciating, driving these homeowners into further financial difficulty.
What's more worrying than the statistics already shown is the fact that the housing market is showing no signs of recovery, meaning housing prices are set to fall further. When that is combined with the slack lending from the banks during the credit boom, it could mean that the number of homeowners facing negative equity could double if property prices were to dip a further 10% in price.
The statistics were based on information gathered from 250,000 mortgage accounts from across the UK and seem to suggest that homeowners from Northern Ireland and the North West of the country are likely to be the worst hit by the situation as property prices in these areas particularly continue to fall.
Housing data published by Halifax, the largest mortgage lender in the UK, show us that house prices have declined year on year by 2.6%, although prices have remained fairly static over the last 3 months.
Further staggering developments from the whole scenario suggest that if property values were to fall by 10%, then nearly one in four borrowers in negative equity will be below the age of 30, with over one fifth aged between 30-40, which paints a bleak future for many who are already struggling with financial problems at such a young age. This is because most mortgage owners would have bought their property in the peak of 2007 before house prices began to decline, which justifies why this age group has been worst hit by the uncertainty surrounding the housing market.
The amount of homeowners affected by this recent slump is almost reminiscent of the numbers from the early 1990's during the housing crash when around 1.8 million households were affected by the ordeal. This demonstrates the continual decline of the housing market and we could be talking record numbers very soon if the house prices continue to fall, as expected.
The London Property Buyers offer expert advice and guidance for all who find themselves in negative equity.