One in 10 home owners face the threat of negative equity if house prices fall another 15%, data from the Bank of England reveals.
The Bank of England’s Financial Stability Report shows that 10.64% of home owners will owe more than their home is worth if house prices fall another 15% from the current level. This amounts to a peak-to-trough fall in house prices of 30%.
Figures from the Bank show that UK house prices have already fallen by 13% from their peak in October last year.
The report claims this is a faster rate of decline than that seen in the US housing market and brings the total nominal fall in UK house prices close to levels seen in the early 1990s.
The report says: “While house prices were rising, many households had accumulated substantial buffers of housing equity. Falls in house prices reduce the size of these buffers and for some borrowers could result in negative equity. But a spokesman from the Bank adds: This is an illustration of what would happen to LTVs if prices were to fall another 15%. We are not predicting that this is what is going to happen.”
this is all relative, if your not intending to move in the near future, can afford the payments, most people will not notice.
For example you could be in negative equity now, but affording the payments, but if you decide to move in 5 years time, then by then house prices will have gone up again you will have paid more of your mortgage of, so people in this situation it wont affect
In 1973 the same thing happened and it lasted 18 months then prices began to rise again.
In late 1989 it happened again but it took about 3.25 years for prices to rise again.
It has been happening since late 2007/early 2008 with house prices going down - this time world wide compounded with difficulties in getting reasonable priced mortgages coupled with increases in deposits. I am no crystal ball gazer but this one is going to last a minimum of at least 2 or 3 years with house prices going down by 20% to 30% - BUT in the end they will rise again - history has a habit of repeating itself
Regards, David Mond, Insolvency Practitioner for over 46 years. Personal Insolvency Practitioner of the year 2012, Personal Insolvency Practitioner of the year finalist 2013 & 2014 awarded by Insolvency & Rescue Magazine and 2015 finalist for Personal Insolvency Firm of the Year.
Prices will recover eventually, but not anytime soon.
One factor that may help is that interest rates are likely to be slashed, but if you can't get a mortgage then the rate is going to be fairly academic. It may help some people in the middle market and remortgagers, but that depends on how much of any rate cuts get passed on.
It's all very well the Bank of England slashing the interest rates, but it doesn't help the man in the street if the mortgage companies don't pass on that cut.
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Sort of makes the 4% indexation under IVA protocol a bit worthless over the next couple of years then!!! And good news for any property owners who are subject to IVAs with the final year revaluation provision.
The 4% is just an indicative rate to show creditors (it was their idea and only their's)what in an Outcome Statement could be achieved. Debtors are to be informed by their IP that in no way is this the figure that they have to re-mortgage at (85% thereof subject to LTV). I will again bring this back up on the Agenda at the Standing Committee of the Protocol.
Last edited by David Mond on Wed Oct 29, 2008 12:44 am, edited 1 time in total.
Regards, David Mond, Insolvency Practitioner for over 46 years. Personal Insolvency Practitioner of the year 2012, Personal Insolvency Practitioner of the year finalist 2013 & 2014 awarded by Insolvency & Rescue Magazine and 2015 finalist for Personal Insolvency Firm of the Year.
