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cashinmattress

Trapped Without Equity To Move

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Trapped without equity to move

Around 3.5 million homeowners are unable to move due to a lack of equity in their home or because they would struggle to get a mortgage, research has claimed.

An estimated two million households are currently thought to have less than a 10% equity stake in their property or be in negative equity, meaning they owe more on their mortgage than their home is worth, according to mortgage broker John Charcol.

A further 500,000 homeowners have only a 10% to 15% equity stake in their property and around one million people have a sub-prime or self-certification mortgage which they would be unable to renew if they moved.

The group said in the current market conditions all of these people would find it very difficult, if not impossible, to buy a new home.

There are currently very few mortgages available for people looking to borrow 85% or more of their home's value, and many people applying for these deals are being rejected because lenders demand high credit scores in order to qualify for them.

Even if homeowners are able to take out one of these mortgages, the interest rates charged on them are far higher than on deals for people with a bigger stake in their property.

Ray Boulger, senior technical manager at John Charcol, said: "When most people move they rely on the equity in their property to provide the bulk of the deposit required for their new property, which is currently a minimum of 10% in most cases, plus moving costs, of which stamp duty land tax is often the biggest.

"Having such a large number of households who are currently unable to move is not only a serious problem for the people concerned, but also has important macro economic consequences."

Meanwhile, research from price comparison website Moneyextra found that despite the fact that 56% of homeowners admit they are suffering from spiralling money problems, 37% would not be prepared to trade down the property ladder in order to pay off their debts.

...because I don't care about property gamblers and their debt problems.

...because people are so delusional that they would rather end up living off of cold canned beans over candle light than face the reality of debt.

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They will be stuck there for years if they don't get repo'd, some of them will have been greedy and some of them will have been gullible and taken in all the hype. Stagnant market, not good for anyone.

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...because people are so delusional that they would rather end up living off of cold canned beans over candle light than face the reality of debt.

Er, that is the reality of debt ;)

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I am not sure why this is surprising. Its been a property escalator since 1995.

Buy a flat, live there for 3-5 years, pay either IO or just the normal the repayments on 25 year mortgage, no extra savings, but gosh now you have enough of a deposit for a small house.

Buy a small house, live there for 3-5 years, gosh now you have enough of a deposit for a big house.

................................................................................

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The point I have trying to be making to anyone who will listen to me is that if prices are so high that the first purchase doesn't really allow you to chip away at the loan principle then you can only move up to a bigger property if prices go up. If prices are low but static then you can move up when you SAVE some money. It has become a ladder rather than an escalator and on this ladder the gaps between each rung are far apart. Now that prices are going up, its no surprise that people can't move up.

I already know families bringing up 2 kids in tiny starter flats, they can't move up, and there will be a lot more of this. I have another friend who is selling a flat in NW London for what they paid 6 years ago. They can only buy their house (and they need a 25% deposit - around £150k) as their parents are helping them. I tried to persuade her to wait as it would be cheaper to rent but she believes what she reads in the papers that prices are going up and she'll miss the boat.

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All this 'prices are going up guff' is a load of rubbish.

It's in the interest of the VI's to fool the people in negative equity to believe that prices will increase. All the media spin isn't just to piss me off.

It's better for the banks/government to make people believe that house prices will go up, never today but always tomorrow. That way the sheeple don't cut their losses and sell up. If this goes on for ten years and you are in debt for 250,000 pounds, you would do better to sell for 200,000 and only have to repay the interest on 50,000 over 10 years rather than the interest on 250,000. Trouble is, if everyone sold up now then prices would crash.

This will take years to bleed through the system. The screw will be turned ever so slowly so that people have to sell up at different times, trouble is do you want to be the last person to have to sell your house for 50% of the 2007 valuation, after 10 years of living like a tramp, :unsure: while others took a hit early on and have got on with their lives?

If you are on a house price ladder at the moment, the rungs are getting closer, not further away. :blink:

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In the end many of them are young people who bought into the property bubble. You should feel for them - we have enough people under 35 in a mess.

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Guest DissipatedYouthIsValuable
Is that quite dear then?

I think it's the obvious MEW trappings that give it away.

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You also have to consider other costs when you move even when you are moving sideways:

Stamp duty.

HIP.

Estate Agent fees.

Survey costs.

Removals.

Mortgage fees.

Solicitors fees.

Could quite easily add up to £10k, ouch. ;)

Edited by winkie

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Ahh, waking up to good old sadistic pleasure in others suffering. Can't beat this place for that.

I love the smell of Envy in the morning.

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Why banks want the current dead cat bounce:

- current homeowner with >90% LTV = high risk mortgage

- strict new <75% LTV lending criteria implies only cash-rich buyers

- net result is a change from high risk to low risk lending for the banks

The banks are derisking their mortgage portfolio. Cash-rich suckers (I know one) will be the ones holding the bag

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Ahh, waking up to good old sadistic pleasure in others suffering. Can't beat this place for that.

I love the smell of Envy in the morning.

Why would anyone envy (or indeed Envy) another's suffering?

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Ahh, waking up to good old sadistic pleasure in others suffering. Can't beat this place for that.

I love the smell of Envy in the morning.

I can't make up my mind about this joker, is it....

1) Osborne Gono(AKA Charterhouse, AKA brucespanner).

2) Valerius.

3) Columbo(AKA Rinoa, Morgs, Time2Buy etc etc).

:rolleyes:

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