Advice offered for negative equity-threatened homeowners

20/04/2009

New guidance for troubled homeowners was given by experts today, after a study showed that two million households were "trapped" by the negative equity threat.

Research from the Council of Mortgage Lenders found that 900,000 people were already "under water" on their mortgages - with their loans being worth more than their home.

Falling house prices also meant that another 1.1 million had too little equity in their homes to move.

Mortgage advisers at Alexander Hall said today that people desperate to switch properties should take swift action.

"If they decide to sell the house they essentially cash in the loan and in selling the property – let's say that they only get £250,000 for the property rather than the £270,000 that they bought it for – therefore they've got to make up £20,000 to the lender," Andy Pratt, chief operating officer at the firm, advised.

"Depending on what the deposit was, what the loan-to-value is, they could potentially lower the deposit on the next property they buy and fund it out of that … In some instances, though, some people will not be able to move."

House prices have fallen by just over 15 per cent in the last year, two separate surveys from lenders have shown.

Tags; Housing Debt and Bills, Young Family Finances,

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