Negative equity only a worry for payers of 'small' deposits

03-Jul-2008

House prices in the UK would have to fall a lot further for owners to experience negative equity, according to GE Money Home Lending.

Representatives for the organisation said house-price depreciation over the last year has been "modest" compared to inflation over the past decade.

"Taking into consideration the average deposit borrowers have paid and assuming no additional lending of overpayments, prices would need to fall by over a third for the average home owner who purchased their property five years ago to experience negative equity," remarked Gerry Bell, head of mortgage marketing at the lender.

"Ultimately the concern in the current marketplace is for the small number of borrowers who put down a very small deposit who may now be feeling overstretched," he added.

Based on today's prices, according to Mr Bell, the average home bought in 2000 with an average deposit of £27,000 has provided a 58 per cent buffer, while the average London property purchased in 1995 would need to depreciate by three quarters for its owner to encounter negative equity.

The 'inbuilt equity' afforded by self-build properties has previously been singled out as a pertinent consideration for first-time buyers finding it difficult to get on the housing ladder.

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'In-built equity' offers mortgage ease for self-build homeowners First-time buyers warned against using debt for deposits

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