House asking prices increased by 2.4 per cent in May, as potential sellers face their equity fears, the latest statistics from Rightmove have revealed.
According to the property website, May saw the lowest number of properties coming onto the market in six years, as falling value reduces home owners' loan to value (LTV) ratio.
This has meant that more and more mortgage
holders are facing negative or reduced equity, which is causing 'equity immobility' and preventing people from moving.
Likely victims of 'equity immobility', are, according to Rightmove, 'equity releasers' who habitually withdrew cash during the 2001-2008 re-mortgage spree, 'recent buyers' with no or low deposits, and 'equity losers' who are already facing negative equity to the tune of 25 per cent.
Commenting on the figures, Miles Shipside, commercial director at Rightmove, said: "Many people who might have wanted to take advantage of the spring selling season to trade up will be victims of equity immobility.
"The choice of when to move is now out of their hands. While some of the impetus behind the increase of over £5,000 in average asking prices will be due to ambition or optimism, it will also be out of necessity as new sellers attempt to scrape together enough equity to move."
According to Mr Shipside, the trend for equity release
between 2001 and 2008 is partly responsible for these equity problems. "Equity-poor home owners are either not coming to the market, or are having to price too high. The scale of the problem is potentially far worse now than in the 1990s downturn, as re-mortgaging
activity was then in its infancy having been strictly controlled until the deregulation of mortgage markets in 1986," he said.
And, according to Mr Shipside, the problem "will only be resolved by affordable mortgage products at higher loan-to-value ratios or substantial increases in property values," and, he adds, "It is impossible to put a timescale on this."Get mortgage quotes and advice »
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