Wednesday, August 24, 2011

The property ladder can be a trap

Low house prices trap a quarter of all mortgaged homeowners

A quarter of all mortgaged homeowners find it almost impossible to move house or take out a new deal. Figures from trade body the Council of Mortgage Lenders (CML) show that more than one in twelve borrowers — some 827,000 — are in negative equity, i.e. meaning they owe more on their mortgage than their house is worth. Yet a further 1.7 million, roughly 17 pc of mortgage holders, have less than 10 pc equity in their properties, according to Money Mail research. Many of these people took out mortgages with just a small deposit before the credit crunch, and are now trapped because their house price has fallen. Henry Pryor, an independent estate agent, says: ‘These people are prisoners in their own home and may be stuck on an expensive mortgage deal.’

Posted by quiet guy @ 08:34 AM (1888 views)
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7 thoughts on “The property ladder can be a trap

  • mark wadsworth says:

    That’s yet another triumph of Home-Owner-Ism! Isn’t the whole idea to ramp up bank income via mortgage lending as far as possible?

    If they manage to encourage people to borrow more than a house is worth, then that’s all good, from the banks’ point of view!

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  • It may also be seen as debt peonage / indentured labour: work for decades paying the banks a large share of your income, or be homeless. Earn your freedom… shortly before you die.

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  • The end of triple A* everyone is a winner economics.

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  • Well done Henry Pryor. One of the lone voices of reason in estate agency.

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  • @2 “Earn your freedom… shortly before you die.”

    very true

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  • Their situation would be even worse if property prices were higher because higher prices means higher prices differences.

    For example, if prices were 20% higher, their 100k house would be worth 120k. However, the 200k house they want would be worth 240k. So they would have to find a further 140k, as opposed to the 100k they had to find in the “low price” scenario.

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  • Look on the bright side, at least you have a roof over your head, things will improve and all the whingers will eventually die 🙂

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