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koala_bear

Cml Negative Equity Figures ~8% Or 827,000 Mortgages

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http://www.bbc.co.uk...siness-14445857

Negative equity affects 827,000 households, lenders say

Unmortgaged housing wealth currently amounts to about £2,230bn

The number of mortgage borrowers in negative equity - where their loan is bigger than the value of their house - is 827,000, lenders have calculated.

The Council of Mortgage Lenders (CML) said the figures, for the first quarter of 2011, suggest the problem is not as great as in the early 1990s.

Then, an estimated 1.6 million households were in negative equity.

The CML said while it made it hard for some people to move home, it did not mean their home would be repossessed.

"Negative equity is much less common than in the 1990s, and in the current cycle low interest rates and a relatively stable employment market are providing more options for borrowers and lenders in difficulty," the CML's director general, Paul Smee, said.

"There is no direct relationship between negative equity and mortgage payment problems.

"What typically causes difficulty for households is not a nominal fall in housing value but an unexpected change in personal circumstances, like the loss of a job or the breakdown of a family relationship," he explained.

First-time buyers The CML's research shows that fewer than 8% of all mortgage holders are in negative equity.

"Start Quote

First-time buyers do have a materially higher propensity to be in negative equity"

CML However, those in this predicament are mainly people who bought a home in 2006, 2007 and 2008, and have thus been affected most by price falls, and first-time buyers who typically put down small deposits.

"Half of negative equity cases relate to loans taken out in 2007, when lending conditions were at their most competitive and house prices at their peak," the CML said.

"Nearly a third of continuing loans from 2007 are in negative equity," it added.

The CML estimates that about 326,000, or 39%, of the current 826,000 negative equity cases are first-time buyers.

In turn, 26% of all current first-time buyers are in negative equity.

"First-time buyers are more vulnerable to experiencing negative equity during a period of softer house prices [and] our latest estimates confirm that first-time buyers do have a materially higher propensity to be in negative equity," the CML said.

The problem is worst in those areas where prices have fallen most in the past few years: Northern Ireland, Yorkshire, Humberside and the north-east of England.

'Phenomenal' wealth The CML pointed out that despite negative equity suffered by a minority of home buyers, the amount of unmortgaged housing wealth owned in the UK was still "phenomenal".

It estimated that people who own their homes outright, with no mortgage at all, own property worth a total of £1.43tn.

Meanwhile, nearly half of people with a mortgage had one that was worth less than 70% of the value of their homes, giving them an equity cushion of at least 30%.

Another quarter of borrowers had mortgages worth between 70% and 90% of their homes.

The rest had less than a 10% equity stake in their homes.

Thus people with mortgages own homes worth a total of £1.84tn and of that their unmortgaged equity cushion amounts to nearly £800bn.

A previous estimate of negative equity from the CML was published in April 2009.

At the time it showed that 900,000 homes had been in that position in the preceding year.

However, the CML said its latest research was not directly comparable with its previous publication, due to the use of a different methodology.

Edited by koala_bear

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"Negative equity is much less common than in the 1990s, and in the current cycle low interest rates and a relatively stable employment market are providing more options for borrowers and lenders in difficulty," the CML's director general, Paul Smee, said.

Love that quote.

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It is cr*p isn't it.

This site is full of people with savings trying desperately not to have their savings eroded. Meanwhile some 900,000 homes are in negative equity but, I suspect, most are oblivious to the fact due to ultra low IRs.

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Nequity is only problem if you have to sell and / or can't keep up with the repayments.

The BoE is doing a good job to make sure the second reason doesn't become a big problem.

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Nequity is only problem if you have to sell and / or can't keep up with the repayments.

The BoE is doing a good job to make sure the second reason doesn't become a big problem.

What is the Bank of England doing to ensure that inflation isn't squeezing consumers?

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Q1...we are in Q3 now...and prices have dropped somewhat.

and, 100,000 mortgages a month pre 2007, many on 125% or 100% IP loans....they are saying only 8 months supply is NE?

course, 827,000 today is 24 months supply. Gaud bless SMI and lenient lenders.

Edited by Bloo Loo

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Nequity is only problem if you have to sell and / or can't keep up with the repayments.

The BoE is doing a good job to make sure the second reason doesn't become a big problem.

Not if you are a bank convincing other lenders you are stable.

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Not if you are a bank convincing other lenders you are stable.

Sorry was just looking at one half of the equation (still feeling hung over from Saturday night :().

If you are a bank you just need to tweak your valuations model - simples ;).

And when that doesn't work any more you end up like NR in less than 3 weeks if Peston finds out too.

If the banks had actually stuck to what was indicative in Basel II (let alone III) rather than trying to find way round it, nequity would be a much smaller problem for everyone.

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  • 343 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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