Hundreds of thousands of homeowners trapped in negative equity
Hundreds of thousands of homeowners across England and Wales who bought properties at peak prices in 2007 – just before the recession – are now in negative equity, according to new research.
Average property prices in 53% of towns and cities across the UK are still below average prices in 2007, data from online estate agent HouseSimple.com has revealed.
The research, which reviewed house prices in 75 towns and cities in England and Wales, found that 17 of the 20 most affected towns since the financial crash in 2008 are in the North of England.
Homeowners in the North West are particularly badly affected, with 40% of the top 20 towns and cities with house prices in negative equity.
The worst affected town is Blackpool, where house prices are almost 30% (-29.4%) lower than their 2007 high – the average price was £109,581 in 2007, while in February 2016 it was £77,317.
Middlesbrough is a close second with -28.4% difference in the average price in 2007 (£107,603) and February 2016 (£77,024). Other towns and cities in the top five for negative equity are Sunderland (-25.5%), Blackburn (-24.6%) and Liverpool (-23%).
Yorkshire and the Humber is also badly hit with 25% of towns in the top 20 for negative equity.
These figures present a stark contrast to average house prices in the South, where prices in London are 56% above pre-recession highs, followed by Winchester in Hampshire at 44% and Stevenage in Hertfordshire, which is up 39% since 2007.
Alex Gosling, chief executive of HouseSimple.com, says: “London homeowners have watched as their properties have risen in value substantially since 2008, but thousands of people around the country have had to put their lives on hold, unable to move because they are trapped in negative equity.
“Unfortunately, the North of England has been slower to recover losses suffered during and after 2008. And anyone wanting to relocate for work or family reasons faces a less than appealing choice, either making a loss on the sale of their property or staying put and waiting until the price of their house at least recovers to the price they paid.
“There is light at the end of the tunnel with prices now climbing across the country, and that should help bring many more homeowners out of negative equity. However, for people living in towns such as Blackpool and Middlesbrough, it will take some time before prices come close to 2007 levels.”
The circumstances in which a property is worth less than the outstanding mortgage debt secured on it. Although it traps householders in their properties, the Council of Mortgage Lenders (CML) says there is no causal link between negative equity and mortgage repayment problems. At the depth of the last housing market recession in 1993, the CML estimated 1.5 million UK households had negative equity but most homeowners sat tight, continued to pay their mortgages and eventually recovered their equity position.
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