First time buyers being hit with negative equity

According to a recent report recent first time buyers in parts of the UK are starting to feel the effects of the housing slump, as they find themselves facing negative equity – a situation that has been out of the news since the darker days of the 1990s.

The report suggests that those most vulnerable are recent buyers with small starter homes and one or two bedroom flats. Across London it is first time buyers with one or two bedroom flats who are suffering the most.

Industry experts state that those that have recently purchased smaller homes and flats are first time buyers who are unable to get a larger mortgage and do not have much of a deposit to put down, hence have had to opt for smaller, cheaper properties.

However, these will also be the first to suffer, where falling property prices will leave them owing more on their home than the property is actually worth.

The report states that the price of one and two bedroom flats in certain parts of London have fallen by 10% over the past year. It claims that the worse hit area of London is Battersea, where the value of a one bedroom flat is said to have fallen by £27,500 in the space of a year, and the value of a two bedroom flat by £42,500 in the same period.

There are just a few areas in London where house prices on smaller properties have held, according to the data.

Experts have also stated that these smaller starter homes are increasingly vulnerable to negative equity because lack of access to mortgages and the withdrawal of the popular 100% mortgage has resulted in many non-homeowners being able to get finance to purchase a property.