Homeowners facing four years of negative equity - Mortgages - News - Moneyfacts


Homeowners facing four years of negative equity

Homeowners facing four years of negative equity

Category: Mortgages

Updated: 04/04/2011
First Published: 31/08/2010

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Homeowners who bought their properties at the height of the housing boom have been warned they face four more years of negative equity.

People that purchased their homes in England at the peak of the market in 2007 paid an average price of £216,800.

However, a forecast by the National Housing Federation has predicted that they will have to wait until 2014 – when average prices are set to rise to £226,900 – before they can recover what they originally paid for their home.

House prices are predicted to rise by 22% over the next five years, according to Oxford Economics, as a result of a lack of new housing supply.

The figures forecast a 7.5% rise this year, followed by a fall of 3% in 2011 and a modest increase of 0.9% in 2012.

A 4% rise is predicted for 2013, with increases of 5.4% and 4.9% in 2014 and 2015 respectively.

Such results would mean continued negative equity until 2014 for homeowners that paid for their abodes at the peak of the market.

The Federation said it feared an entire generation of people would be locked out of the housing market as a result of high house prices.

The chronic shortage of social housing will leave those shut out of the home ownership market with little realistic chance of getting a social home, it added.

"House prices will inevitably increase in the long term because of huge under-supply of housing," commented David Orr, chief executive of the Federation.

"Even though price rises look sluggish for the next few years, affordability is not improving for many low-to-middle income households - as banks continue to restrict their mortgage lending and house prices remain historically expensive in relation to salaries."

Find the best mortgage rate - Compare best selling mortgages

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

Related Articles

85% of remortgagors benefit from lower rates

Mortgage rates are among the lowest ever recorded, and in the case of fixed rates, they just keep falling! This means it’s never been cheaper to fix your mortgage rate for the long term, and unsurprisingly, remortgagors are taking advantage.

Does your mortgage lender owe you money?

Earlier this week, the financial watchdog revealed that hundreds of thousands of mortgage holders could have been overcharged by their lender. Are you one of the many who could be in line for a windfall?

Do you think your home will rise in value?

There’s been a lot of talk recently about the rate of house price growth slowing, but is it affecting your personal expectations? According to research, it could be, with fewer people now expecting the value of their property to increase.