Negative equity prisoners down 13%
The toal number of borrowers with mortgages equal to more than their property’s current value has fallen from 827,000 to 719,000 in that time according to the Council of Mortgage Lenders (CML).
In the CML’s latest News & Views, it said the 13% figure is measured against the Halifax house price index.
Recent analysis by the FSA indicates that calculations based on the Nationwide house price index would suggest that only around 5% of borrowers taking out a loan since 2005 would now be in negative equity.
The CML said: “Given the sensitivity of findings on negative equity to the choice of index used, our analysis based on the Halifax [House Price Index] could be seen as a “worst case” estimate. Perhaps, therefore, it would be better to pay more attention to the overall improvement in levels of housing equity, rather than the numbers produced using different indices.
“Since house prices started to fall in 2007, different parts of the UK have experienced significantly different price movements. At one extreme, prices in Northern Ireland are now less than half of the 2007 peak. In London and the south east, however, prices have been much more resilient.”
The CML also reported the proportion of first-time buyers who have taken out loans since 2005 and are in negative equity has declined from 26% to 20%. It also found that 90% of all borrowers who have taken out loans since 2005 hold some equity in their property, with more than half owning at least 30% of the value of the property and more than 80% holding an equity cushion of at least 10% of their home’s value.
The CML said house price movements have reduced mortgage borrowers’ housing wealth to £1,850bn, down from £2,100bn in 2007. The amount of unmortgaged housing equity held by borrowers remains broadly unchanged since last year at around £800bn, equating to an average Loan to Value of 56%, reported the CML.