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More homeowners in negative equity

Falling house prices leave Brits struggling

Friday, 31 October 2008

Writes Hazel Cottrell
hazel.cottrell@consumerchoices.co.uk

House prices have fallen by more in the last year than the average person’s annual salary, according to new figures from Nationwide.

House prices have fallen 14.6% since their peak in October 2007, according to the latest Nationwide (www.nationwide.co.uk) house price index. The price of a typical house is now £158,872, which is £27,000 less than in October last year. That is more than the national average salary of £25,000.

The Bank of England has estimated that the fall in house prices has left nearly half a million homeowners in negative equity. It predicts that this number could rise to 1.2 million if house prices fall by another 15%.

This is the biggest drop in house prices since Nationwide starting tracking them in 1991. Fionnuala Earley, Nationwide’s chief economist, said the recent decline should be put into context. She said that the current average house price is “still almost £30,000 more than five years ago.”

Falling house prices and rising household expenses have left homeowners struggling with their mortgage repayments. Earlier this week the Financial Services Authority (FSA) announced that the number of repossessions has increased more than 70% in a year and average arrears have soared by £700 to £4,800 since this time last year.

Philip Hammond, shadow chief secretary to the Treasury, told the Guardian: “These figures are yet more bad news for all those families who stretched themselves financially to buy their homes. It seems inevitable that more negative equity and repossessions are on the way.”

For those struggling with meeting their monthly mortgage repayments, Chris Eagle, commercial manager at CreditChoices.co.uk has the following advice:

“If you find yourself in financial difficulty it is essential that you contact your lender as soon as possible. Lenders have procedures for tackling payment difficulties and the sooner you let them know you are having problems, the sooner they can help.

“Now would also be a good time to assess your other monthly outgoings. Check out our Essential Saving Tips to make sure you are on the cheapest deals for all your finance, energy and utility needs.”

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