Negative equity * mortgage problems * property prices continuing to fall are creating mortgage problems for people with negative equity who are unable to move or switch mortgage providers
More and more homeowners are finding themselves stuck in a property and unable to move due to falling property prices and negative equity. Many property owners are facing mortgage problems and unable to switch to a new lender or negotiate a cheaper mortgage with their existing bank.
Negative equity is a term used when the value of a property used to secure a mortgage is less than the outstanding balance on the mortgage. Warnings that house prices might drop by more than a third over the next three years could result in an estimated 500000 people owning properties where the value falls below the mortgage secured on the property.
This is bad news for anyone already having mortgage problems; either because they cannot meet their current repayments, are facing an increase due to a fixed rate mortgage coming to the end of its term or homeowners who need to move house.
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PROPERTY PRICES CONTINUING TO FALL
Property prices are continuing to fall for two main reasons. House prices have risen too fast over the last decade and were always going to fall back in value when demand slowed down; and because the banks are reluctant to move back into the mortgage market with any enthusiasm, the demand is being suppressed by an inability by most people to buy a property.
MORTGAGE PROBLEMS FOR PEOPLE WITH NEGATIVE EQUITY
Anyone who owns a home with negative equity is going to find it impossible to find any mortgage lender prepared to grant them a remortgage based on a property that can not cover the value of the loan. Furthermore, as property prices are expected to continue to fall, this problem is going to get worse.
UNABLE TO MOVE
In simple terms, it means that anyone caught up in this predicament is going to find it impossible to sell their house and move. On the bright side, anyone who does not need to move and does not have mortgage problems can simply sit and wait out the problem.
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SWITCH MORTGAGE PROVIDERS
So, if you have a mortgage on a property with negative equity, you will find it impossible to switch mortgage providers. Whilst the Bank of England has reduced the basic rate of interest, people looking for a new mortgage are unlikely to benefit from this cut in the base rate although existing borrowers should see a reduction in their level of repayments.