Negative equity affects many homeowners

Earlier this month industry officials claimed that the end of the house price falls could be in sight, with some predicting that house prices could fall be less then 10 percent more before starting to rise again. However, house prices have already fallen significantly over the past year and a half, and this has left many homeowners facing negative equity.

Those most likely to fall into negative equity are people that purchased their homes within the last few years when prices were at their highest, and who put down very little by way of deposit. Negative equity is where the value of the home is lower than the amount actually owed on the property, and the falling house prices have plunged many people into this situation.

One research official said: “The shift to negative equity has the potential to be a mammoth welfare disaster for the nation. The reality is that if there are further job cuts, the problem will become significantly worse.”

The Royal Institute of Chartered Surveyors said: “It has highlighted an important point that negative equity has returned and is getting worse. But when you make an assessment of negative equity, you have to make significant assumptions. There is a danger of people becoming obsessed with negative equity when they are not planning to move.”