Monday, June 2, 2008

Sound Fundamentals

250,000 facing negative equity

Large numbers of homeowners have slipped into negative equity as a result of months of consecutive falls in house prices, an investment bank has warned. According to Citigroup, since autumn UK house prices have slumped by seven per cent. As a result, the firm calculates that 250,000 mortgage holders now face a situation whereby the value of their home is lower than what they owe.

Posted by housebear @ 10:19 AM (875 views)
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8 thoughts on “Sound Fundamentals

  • waitingfor hpc says:

    Good!

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  • As lending criteria tightens and the LTV requirement for the best deals reduces, a lot of people will find they still can’t get a good deal even if they have some equity remaining. Therefore a lot less money swilling around for the general economy.

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  • Many of lenders were offering negative equity mortgages last year, it would be interesting to know where there measurement cycle has started.

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  • No doubt negative equity is exacerbated by non-payment of mortgages by those not wanting to pay off a depreciating asset and therefore waiting until they have to hand back the keys.

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  • Waiting 2 Buy says:

    the crash is about to happen they have stop saying the value of your house is………. and now are saying house price inflation and price re-adjustment they talk of high inflation in zimbabwe well we’ve got it too

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  • mark wadsworth says:

    May I refer you once again to Alice’s negative equity-o-meter?

    To cut a long story, there are about 10 million mortgages, and they are spread pretty evenly between 1% LTV and 110% LTV.

    Ergo, every 1% drop in prices is another 100,000 in nequity.

    Simple!

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  • As Mark points out, 250,000 is going to be the tip of an enormous iceberg of nequity. And as people feel poorer because their houses are worth less, they will spend less and our consumer-led miracle economy will be shown to be a crack-up boom.

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  • A big question for HPC is: how many will carry on paying the mortgage when they’re in negative equity and how many will send back the keys, reinforcing a downward spiral?

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