Falling prices may push 5million homeowners into negative equity

Posted under General by Michael

5 million homeowners could land up with mortgage more than value of their property by end of 2009, as house prices continue falling, reveals research by the GfK NOP group.

It has estimated that 3.8 million homeowners are already in or likely to face negative equity with 1.2 million more to add to the number by end of 2009, if house prices go down further by 10 to 20%.

Centre for Economics and Business Research (CEBR) had warned that property prices could witness 25% fall this year unless the Government took measures to boost mortgage lending. This would amount to a peak-to-trough fall of nearly 40% from late 2007 peak.

According to Gfk NOP, young couples, younger families and single people in the age group of 25 to 34 are most likely to land with negative equity. Research group explains that these people have taken out high loan to value ratio mortgages before market peaked in summer 2007.

Andy Thwaites at Gfk Financial apprehends that problem will significantly aggravate if current trend of job cuts all over the UK continues.

According to the Nationwide, property fell by another 1.8% in February, taking year’s fall to 17.6%

Chances of negative equity are more when people are forced to move. If they stay put in their homes, they will benefit when market starts stabilising.

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