Numerous mortgage deals have been created recently to suit home buyers with smaller deposits, leading to an increase in the number of people at risk of falling into negative equity should house prices drop. According to the property surveyor e.surv, the number of vulnerable households has reached its highest level since the financial crisis.
In June, 10,898 households obtained mortgages with deposits of 15 percent or less of the value of their property. This form of lending – referred to as high loan to value, or LTV – now represents one out of every five mortgages taken out, a level which is the highest seen since 2008. Just one year ago, the number of high LTV mortgages being obtained was one in nine.
Although the numbers of these types of mortgages currently being taken out is lower than it was before the financial crisis, when one in every three mortgages could be described as high LTV, the danger is that more people are becoming vulnerable to the possibility of negative equity affecting them if house prices plummet.
Instances of negative equity soared following the credit crunch, as home buyers with high LTV mortgages saw house prices fall. Although high LTV loans can help first-time buyers on to the housing ladder, a Bank of England official said that household debt is currently leaving many mortgage holders in an unsafe position.
In order to avoid making the wrong mortgage decisions, more people are seeking professional advice and many would-be mortgage advisers are taking CeMAP Training Courses to acquire qualifications to meet that need.