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Negative Equity Is Threatening The UK Property Market

As if there was not enough bad news in the property and financial sectors, it appears that over 30,000 people have taken out 100% mortgages since January 2007. Research shows that a large number of these people will be in, or on the verge of, a negative equity situation, where their homes are worth less than their outstanding mortgages. This growing threat has the potential to lock many people into their current homes for a long time, and if the economy weakens yet further many may see their homes repossessed.

Over the last few months we have slowly seen the UK property market come under growing pressure, much of which will have an impact for many months and years to come. Those in negative equity will not be in a position to sell their properties and take the loss, instead hoping that property values pick up in the short to medium term.

This in turn will see the number of property transaction stagnate and reduce competition amongst buyers in the sector. There seems little likelihood of prices consolidating even at current levels in the immediate future, with many analysts forecasting another marked drop over the next 12 months.

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