So Google’s bid for world domination continues with their purchase of Motorola – I wonder where it will end? I don’t like big brother theories, as my little brothers will tell you, but even I’m, beginning to wonder if one company should be so powerful and hold so much information about us. But let’s leave that debate for another day as this morning I’ve been chatting with Mike the Mortgage Monkey again about the doom that is negative equity.
For those that don’t know what negative equity is, it is the situation where your house is worth less than your mortgage. i.e. if you sold it you would not have enough cash to pay off what you owe. This obviously prevents people from selling their houses and is one of the reasons the housing market is in the doldrums.
According to the Council of Mortgage Lenders (CML), 827 000 borrowers were in negative equity on the first quarter of this year, with nearly half of these having taken out their mortgages in 2007, when house prices were at their peak and lenders were prepared to lend over and above 100 per cent of a property’s value.
If you take into consideration mortgages taken out in 2005, the figures are better, with only 14 per cent in negative equity, but a further 11 per cent of these have equity of less than 10 per cent. With the majority of mortgage companies not prepared to lend more than 90 per cent of the value of the property, this means that none of these people are able to move or re-mortgage at the moment (unless they have managed to save a decent sum of money of course).
This basically means people have to wait for property prices to increase in value (which seems unlikely for the forseeable future), or for the lenders to relax their lending rules, which is also not going to happen soon given the current climate. All in all with today’s news that inflation has reached 4.4 per cent again the tough times look set to continue for most people. Maybe we should ask Google for a loan? Although if Google were to enter the lending market as well I really would start to worry!
Are you in a negative equity situation? If so when did you take out your mortgage and how long do you think it will take before you are in a position to move or re-mortgage?
Leave a comment below and let us know.