Negative equity fears downplayed by experts

Posted: 12 Feb 2009 09:51:35 GMT

Around 20 per cent of UK borrowers currently hold a mortgage of 90 per cent loan to value (LTV) or more, a new report has revealed.

According to a new study carried out by the website Fairinvestment.co.uk, the average mortgage LTV rate in the UK now stands at 64 per cent, meaning most homeowners are relatively free from the threat of negative equity.

However, three per cent of those questioned had taken out mortgages with an LTV of 125 per cent, while 13 per cent had borrowed 91 to 100 per cent of their property's value.

While some observers have warned of the possible negative equity implications, Sharon Bratley, chartered financial planner at Fairinvestment.co.uk, explained that most people will be able to weather the economic storm.

"Unless they are planning to sell up, negative equity is unlikely to affect homeowners who can hang on until the market recovers," she said.

At the same time, the Council of Mortgage Lenders has expressed its confidence that its original estimate for repossessions in 2009 will not be exceeded as both lenders and borrowers react to the market turbulence.

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