Huge Numbers Of Home Owners In Negative Equity With Loans
The housing and home owner loan market in the UK is continuing to struggle in the current economic conditions at the moment and the situation has been made even worse by a high number of borrowers who are in a negative equity position with their home owner loan.
According to a new survey from HSBC, somewhere in the region of 350,000 homes in the UK are in negative equity, particularly those borrowers who bought their house and took out a loan for a high loan to value amount, just before the credit crunch back in 2007.
Since that time, property prices have generally dropped as the economic situation has worsened and home owner loans have become harder to obtain. This has left many borrowers who took out a home owner loan or mortgage for more than 90 per cent loan to value in a position where the outstanding balance on their loan is greater than the actual value of their house.
This has left many borrowers trapped in a negative equity position, whereby they are unable to sell their house and clear the loan, or are unable to remortgage to a better loan deal, due to the currently tough criteria from lenders with regard to loan to value ratios.
Those worst affected are those who were first time buyers back in 2007 who needed a high loan to value mortgage or home owner loan. Many of these individuals have now outgrown their first property, but are unable to move house due to negative equity.
A spokesman for HSBC 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 loan if they want to move up the housing ladder.”
