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100 Percent MortgagesThere were numerous residents in the UK that had 100 percent mortgages either as a first time home buyer or as a way to get equity from their homes. Now there are several thousand who are suffering from their hundred percent mortgages due to the negative equity they currently hold. About 23,000 mortgage borrowers in the UK are in the negative equity phase. This means they are not able to borrow any money against their house and if they have run out of the money they borrowed, they might even struggle to pay back the loan. The Council of Mortgage lenders are showing new data from March to support this trouble the UK residents are currently in. In a negative equity situation a borrower has more than the market value taken out of their home. But how do they get in this situation? Well we discussed one of the reasons for this, but there is another. Part of the homeowners in this situation borrowed 100 percent loans and then the value of their home dropped. The housing prices have been on the fall because the loans are getting tougher to find and of course the subprime mortgage deal. In order for some individuals to sell their homes, which has been a needed thing to do they have had to lower the prices. This in turn causes the housing values around them to lower, which means the equity turns to a negative for those paying off their loans. The CML spoke about this issue saying that the problem will not be a long one if the individuals are able to make the payments on their mortgage. However, those who are struggling and fall behind on payments could very well lose their homes. The housing prices are going to continue in this downward cycle at least for the rest of this year. Back To Financial News June 2008 100 Percent Mortgages |
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