Nearly one million households are in negative equity, the Council of Mortgage Lenders has said. It equates to one in seven mortgages, with the figure rising to one in four in the North-East and Yorkshire & Humberside.
Research by the CML shows that 827,000 borrowers were in negative equity in the first quarter of 2011 – much the same number as in 2009, but nowhere near the peak of 1.6m households in the early nineties.
Borrowers most likely to be in negative equity are in Northern Ireland, Yorkshire & Humberside and the North-East of England. Almost all those in negative equity have bought since 2005. Before then, negative equity was ‘negligible’, says the CML.
The worst affected, not surprisingly, are those who bought in 2007, when the market peaked: nearly one-third of those buyers are in negative equity.
However, the research also shows that, while the amount of unmortgaged housing wealth held by individual borrowers varies enormously, the aggregate loan-to-value ratio on mortgaged property in the UK is less than 60%.
Nearly half of existing borrowers have outstanding mortgage debts equivalent to less than 70% of the value of their home, while a further quarter have an equity cushion of between 10% and 30% of the property’s value.
This means that borrowers overall hold unmortgaged housing wealth worth around £800bn.
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Comments
rant: Thank you for your response. Interesting that YOU (there I go again with my caps... ;o) ) choose to answer this one. I hold true to my previous statement that you secretly yearn to cross to the dark side and become an Agent - and reading what you have stated I reckon you'd be a pretty good one...
Your analogy to the tobacco industry is particularly interesting. Smoking kills. The proof is there for all to see. It doesn't kill EVERYONE who smokes; it kills SOME who don't. It costs Health Services worldwide billions upon billions every year - yet it is still legal. Why? - because the money it brings in to the various Governments' coffers outweighs the expenditure. And in order to ease the guilt (and to try to look the good guys in this...), the Governments place a requirement on the tobacco companies to put Health Warnings on their product. There - absolved of all involvement! I think not...
HOWEVER... FF-S, Gloria etc are playing the game differently. Using the same analogy, I would argue that they are (or would be, in FF-Ss instance...) actively telling their nearest and dearest NOT to smoke - but advertising to all others that it is a safe and pleasurable experience, do you not think?
The property industry has not faced conditions such as these for more than a decade and a half. I personally know FAR MORE Agents who have entered the industry in the last fifteen years than those who were there in the mid 1990s. In other words, a large percentage of professional advisers cannot quote from experience what happened during the last property cycle.
What IS needed is a confidence in what you are selling. The owners of the properties deserve that at least, as they are paying for the service.
Is it that Gloria has no confience in home-owning full stop? (in which case I repeat my earlier statement that she should not be selling something she clearly has no confidence in...)
Or is it that she simply wants her daughter to wait until the mythical bottom of the market before buying low in order to make money out of property - something that both you and I (and others such as Ace, Ray, etc...) state should NOT be the motivator?
I'll have a go then Pee Bee.
There is of course a separation between private and professional opinions. Why do people still work in marketing roles for cigarette companies? A professional is someone who knows when to speak their mind and when not.
In your example, why is the vendor inviting an EA to value their property if they are unsure whether now is the time to be buying and selling? Seems to be an unusual way round of doing things, unless of course the vendor enjoys the company of EAs over a cup of tea or two.
It's all case by case. A family that is looking to purchase a home, has a sizeable deposit and good job security right now is very different to a BTLer looking for quick capital gains. It also depends on the personal financial circumstances of the individual and I doubt that many EAs have 'financial advisor' in teir job description.
People need to do their own research re making the largest purchase of their life. Instead, we have a culture in this country where people are keen to claim and accept responsibility for a wise financial move and have a strong desire to blame or sue someone else when that went wrong and scream that the government should help them.
The level of financial ignorance in this country continues to alarm me. This is the information age and access to details etc has never been easier. Instead, too many people turn to celebs' opinions, the guy down the pub, their colleague etc for advice.
In this situation, I think F-FS or whoever should tell the vendor that house prices can go down just as much as up and that no-one can predict the future. He should then suggest that the vendor does his own research so he is comfortable with how he / she would like to proceed (this is also a bit of self-interest to reduce the chance of the vendor doing that research further down the line and then pulling out in the future). F-FS, or anyone in that situation can then come to an anonymous forum like this and let off steam about how many people think more about their X-Factor vote than huge financial decisions.
Blimey, FF-S! - You STILL trying to work out an answer to my question that doesn't make you look like a complete berk who will shaft SOMEONE in order to make a living?
Fun Boy Agent had a stab at it in only 20 minutes...
And what about the first question I posed: "If a seller offered your company £1,000 extra to achieve £5,000 extra on the property price over and above what you 'know' to be the going rate - what would be the outcome? FIVE GRAND - that's all. No dreamland figure here - just a couple of percent or so over the going rate..."
Open to all - I doubt that FF-S is prepared to comment...
Pee bee
ooo, ooo,, ooo... I know that one !!
jump cost?
Am I right?
FF-S: So - let me put this scenario to you. You appraise a property - the £175k three bed terrace you love so dearly and can turn over before the ink on the window card is dry - and establish that the vendor is planning to move upmarket and buy at roughly double the price he is selling at.
He asks you if now is the right time to sell and buy. What do you say?
FF-S: "Isn't the whole point of a free market is that goods (be they a pack of chewing gum or a 3 bed terrace) are worth what you can sell them for?"
ABSOLUTELY! But with a 3 bed terrace you don't know how much you can sell it for until the final offer comes in - THAT is the difference!
The Agent's job is to seek best price for the vendor - you of course agree. HOWEVER, if the Agent 'knows' that the 'going rate' for a three bed terrace is say £175k, based upon recent sales, then I am seeing more and more that they are preconditioned to advise the vendor that THAT figure be the BEST they could hope for - and possibly LESS.
Come on - once you achieve £175k for a particular property, shouldn't the aim be to achieve MORE if it is a better property; AT LEAST THE SAME if it is no better/no worse - and THE SAME if it is slightly worse?
Never mind Economics 101 - what about Salesmanship 001??
Sorry - but at this moment in time, the tail is wagging the dog. Buyers believe they have the upper hand - and are using Agents to turn the screws for them, as without each sale the Agent does not produce revenue.
If a seller offered your company £1,000 extra to achieve £5,000 extra on the property price over and above what you 'know' to be the going rate - what would be the outcome? FIVE GRAND - that's all. No dreamland figure here - just a couple of percent or so over the going rate...
Gloria makes an interesting point: my kids aren't old enough yet, but would I advise them to buy in this market?
Probably not. I'd advise to wait for further falls which I view as invitable.
Is that hypocrisy as I'm still selling to people who come in through my door? No I don't think so. My duty of care to them (unlike a father's advice to his kids - for all they listen!) extends to being professional about the transaction, not in engaging in some great debate about their life direction. If they choose to buy at this time they've made and adult choice about buying a home for themselves. I don't see any hypocrisy from me or from Gloria for that matter.
Would I advise people to sell, on the other hand? Well, one thing I wouldn't advise for say, pensioners selling up, is to live with high living costs in the hope of a cash windfall 'when prices recover'. Because I simply don't see that happening for many years. Indeed I would urge to sell sooner rather than later.
"I repeat. If someone owns a property BUT HAS NO INTENTION OF SELLING IT, then its' "value" is of no relevance to the wider market."
...that's bang on. If the property has gone up 10 fold or the 'value' has decresed drastically, it doesn't matter if the owner does not want to sell.
A house is a home firstly.
Peebee: You don't know WHAT the property is "worth". You know what you can get for it - TOTALLY DIFFERENT!
Isn't the whole point of a free market is that goods (be they a pack of chewing gum or a 3 bed terrace) are worth what you can sell them for? Or has Economics 101 somehow been altered since I last looked?
On the other point: You are arguing about individual sellers. I'm making the point that negative equity is a problem for the entire market and therefore is NOT irrelevant for anyone who either owns or sells property (whether they are in negative equity personally or not) due to its wider effects on depressing sales, impacting mobility, depressing lending etc.
You can stick your head in a bucket of sand all you like but just because you don't see what's going on doesn't mean it can't creep up and kick you in the behind!
Finally as for busting a gut to achieve impossible prices for those who bought at the wrong time (or blew their equity on holidays and 4x4s) ... I'll leave that to yourself, Superman, and that hypnotist off the telly ....
Not good news, but expected I suppose.
Like PeeBee said, it is only a problem is you need or want to sell.
If you do need to sell your home and have negative equity then it is worth taking a look at www.needtosellhomefast.co.uk as they can still buy your property even if it is worth less that whats on the mortgage.
Pee Bee - it's mostly because they think house prices only go up ; )
rantnrave - exactly!
It is nice to see a HPCer recognising a point that does not add weight to their cause.
Gloria Andaluza: Excuse me? You have the nerve to pull AceofSpades for one comment he makes on this site, when I have hardly read an ounce of sense in ANYTHING you have typed so far?
THEN, you go on to state "...you also just insulted my daughter whom I have advised to wait..." I have let it go so far when you have commented along these lines previously - but no more. So - let's get this straight, shall we? You tell your daughter NOT to buy a property. Is this the advice you give OTHER PEOPLE'S DAUGHTERS when they come into your Agency? Do you warn all prospective purchasers of "...buying a house at these levels..."?
You hypocrite. If you do not believe in what you are selling - then you should not be selling it.
Gloria, you looked at a post I wrote specifically to another poster. We have exchanged views togehter for a while and it was specific to him. You just took an assumption on it, with NO prior knowlege and made an INCORRECT comparison, labelling it as my own.
NEVER assume eee ooorrr!
I reckon that a sizeable percentage of the 827,000 or so don't even know they are in negative equity.
FF-S: On the subject of talking rot...
You read what little you wanted to in order to try to make a point. Obviously not much, then.
I repeat. If someone owns a property BUT HAS NO INTENTION OF SELLING IT, then its' "value" is of no relevance to the wider market.
CML are claiming that a eight hundred thousand-odd properties are 'affected'. Of these, HOW MANY are in need of selling do you think? THEY are the 'affected' properties - none other.
Until the answer is ALL OF THEM, then the numbers are purely propaganda.
You state "...and all in all adds to a reduction in transactions." So WHY, then, is the emphasis on prices reducing?
"I feel for these people but they are asking us to do the impossible by selling their houses for more than they are worth..." You don't know WHAT the property is "worth". You know what you can get for it - TOTALLY DIFFERENT!
Instead of all this guessing what the nice, kind buyer MIGHT pay if the wind blows in the right direction and you catch them at a weak moment, and then chipping it a bit in case a cheaper one comes on the next day with another Agent and robs you of your rightful commission, how's about we hear from some Agents who are actually achieving prices that stretch the buyer in these tough times? Now THAT would be a turn-up for the books...
Was I around in the 80s and 90s? Oh, yes - and the late 70s as well.
Selling throughout them all, thank you!
AceofSpades - Did you really just compare not buying a house at these levels to looting 2 laptops?
Whatever your feud with another poster you also just insulted my daughter whom I have advised to wait, and your high horse moral superior is a little obvious. Put it away will you.
PeeBee, you are talking total rot.
Negative equity has a huge impact on the market as it reduces people's options (frequently ruling out trading up or even trading down), impacts sentiment, and all in all adds to a reduction in transactions.
In the current climate, negative equity (and fear of this increasing in future as prices drop) is driving credit-restricting behaviours in banks and building societies, a vicious circle that is putting even more downard pressure on prices, and putting more in negative equity. (The trend towards interest only mortgages is another reinforcing factor as loans for many now don't reduce over time).
Weren't you around in the 80s and early 90s? Many people (including people in broken down relationships) got stuck in properites that didn't suit them (location, size etc) for years. It is happening again and definitely depressing the market.
Negative equity and its impact on people is the flip side of boom and bust/bubble and burst housing market that we have here. The psychology of a bubble such as we had between 2001 and 2007 leads to people taking ever riskier decisions, until the whole thing dries up when the music stops (as it always does at some point).
From a purely selfish perspective, it's also fuelling fantasy price setting as people go on the market looking for unrealistic prices, not because they are greedy but because they can't afford to move if they take any less. I feel for these people but they are asking us to do the impossible by selling their houses for more than they are worth and in general I find ways to see they put their instruction elsewhere.
As always people's only option is to muddle on but it's patent nonsense to say it has no effect!
Dan, please.
These people are suffering more than they ever will in their lives you hope (or at least I do) and the thing you choose to write about is the negative equity they potentially face...get a grip man.
This issue is very close to me and the last thing I, or others, want to hear is the financial implications that the already suffering people may face.
There was no point to your first post.
For the record, RantnRave is well received by many (including me), who is part of the same 'clique' as you. That says a lot about the posters.
OKAY ALREADY!! Enough of the handbags - and let's get back to the subject, please.
Now I know that's a rich one coming from me - but none of this is going to spark real debate is it?
Dan, Ace: haway lads - neither of you are known for this hot-headedness so lets resort to the usual good-humoured banter between HPC and the rest-of-the-world, huh?
Okay - so the good old CML decide to issue this statement. They have sent out their team of valuers and can categorically state that a million people are in neg-eq! Blimey - I wonder who paid for all the visits? And none of the surveyors I know have been involved - so one or two must have been working 24:7...
Utter, utter trash. A story from nothing; meaning nothing; resulting in nothing. It has given our HPC friends a flash of renewed hope - however the single fact remains - that NEGATIVE EQUITY IS NOT AN ISSUE UNLESS YOU NEED TO SELL! Even then - it not necessarily an issue.
If I choose to keep a thousand quid under my mattress, it will still be a thousand quid in a year's time. The fact that this year it would pay my gas bill, and next year it will be short of paying it all is irrelevant. It is MY grand and I can do what I want with it. I will spend it when and if I want.
Similarly, if I own a house that was worth a hundred grand when I bought it and it is now only worth ninety, so what? It is mine: I will sell it if I want... I will keep it if I want. ONE THING is for certain. If I don't WANT to sell it; don't NEED to sell it - then no-one is going to get their hands on it! Hopes of floods of sub-market value properties up for grabs dashed immediately. Sorry. ;o)
Dan. Stop posting such rubish then!! What has your mates experience in the police got to do with the price of fish. Whilst I have every sympathy with him and yes the system sucks, your post is irrelevant .
AceofSpades, I feel nothing but pity for someone as bitter and angry as you. Look at you throw shameful allegations around. All because of your hate.
Ray, Every time I post I get attacked by the usual shower of idiots (great example on another topic today from Chris Peacock). When an EA later makes basically exactly the same point a few posts later they are well received. I was half expecting to condemn the riots only to have poop throwing fools to ask what the hell I know and the at the rioters were marvellous chaps. Only to reverse that next time they post. Hence why I qualified my comments.
RantnRave, I think not. A good friend of mine is a Police Officer. A local scumbag put in a bogus complaint against him for assault, and despite there being no evidence, the scumbag being a previous committed self harmer under the mental health act, and the issuer having previously issued 14 complaints against police, all of which were thrown out, despite all of that a whole industry descended upon my mate. His promotion was cancelled, he was suspended, he was taken to court and the CPS despite having no evidence whatsoever pressed for jail time. All because he was a police officer and they will run any case against an office so they can be seen to tough on the police. This is they culture that we have. As a result my mate who was an exemplary and well commended officer took a desk job and is looking outside the force for work does not want to go anywhere near the front line again, why should he, it’s not worth it when the system is setup to be a hard as possible on the law-abiding and give as many free rides and indulgence as is possible to the scumbags.
Oh this particular scumbag by the way got a free flat shortly after, on taxpayers money.
I'd be interested to know if these figures take into account those on interest only mortgages whose repayment vehicle is taking a battering (or doesn't even exist).
Only you could try and use the riots for another round of doom mongering HPC style.
Thats pathetic.
Dan - yours are hardly inspiring.
Your first comment was unecessary. The only important thing now is the safety and protection of the affected, innocent people and areas.
Nobody gives a damn about % or £'s in these areas right now.
People have lost homes, businesses, been hurt and traumatised, but you pop up with a comment that their equity will drop in a few months.
Now, THATis patehtic.
I would not be surprised if you had helped yourself to a laptop or 2 during the lootings.
Chris, what a pathetic comment. Truly pathetic.
FTB Dan, I wouldnt worry about the big boys in London you just feel smug in the comfort of your mum and dads box room. Maybe next year eh!
Not good news for instruction or transaction levels.
Anyone care to guess how many London borrowers will be in negative equity in a few months when the affects of these rampages hot the Council of Mortgage Lenders figures.