Home loans: Negative equity 'not so bad'

17 Jun 2009

Negative equity is not as severe a problem as it is often perceived to be, an expert has said. Property expert Malcolm Harrison was responding to figures from the Bank of England showing between seven and 11 per cent of owner-occupier mortgages are in negative equity.

Explaining that buying a house is a long-term investment, he said that negative equity is not an issue if people do not need to sell their homes. "It's only a problem if you have to sell because you can't pay your mortgage," he said, adding that many lenders will try to help if a borrower becomes unemployed.

Negative equity is when a house's market value is less than the value of the loan taken out to buy it. Most households have substantial equity in their homes, according to the Bank of England data. Of those in negative equity, 73 to 78 per cent had a shortfall below £15,000 and 56 to 65 per cent had one that was less than £10,000.

Written By: David Warner

© 2010

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