Negative equity is ruling the media this weekend as figures are bandied about from mortgage bodies and experts stating that around 1.2 million homeowners have been pushed into negative equity thanks to the falling house prices.
Negative equity is when a person owes more on their mortgage than their house is worth, but is it really a problem?
As the Council of Mortgage Lenders (CML) quite rightly stated, this situation is likely to result in the stifling of house moves because if your home is in negative equity then you will be unable to sell it unless you are lucky enough to have enough capital in the bank to cover the difference.
However, for the person living in the house in negative equity, the situation should only be a problem if they need to move home or need to remortgage their house.
Reading more closely into the figures, around two thirds of the 1.2 million – about 900,000 – have only a small deficit of 10 per cent or less which translates into about a £6,000 shortfall for most first time buyers and £8,000 for other homeowners. The situation is certainly not as bad as some are making out. In summary, providing you are happy and able to stay put in your home, negative equity should not be a huge problem.
