Almost one million mortgage holders in the UK are currently facing negative equity to some extent, research from the Council of Mortgage Lenders (CML) has revealed.
According to the research, this is less than during the last housing market recession of 1993, in which 1.5million households were estimated to be in negative equity.
Of the 900,000 mortgage
holders in negative equity, the figures show that two thirds face shortfalls of 10 per cent or less, which, according to the CML, is the equivalent of £6,000 for first time buyers and £8,000 for other home buyers.
However, unlike the last housing downturn, this time the people affected by negative equity are more widespread, Bob Pannell, CML head of research said:
"Although negative equity has resurfaced as house prices have fallen, one big difference for the early 1990s downturn is that it is less concentrated among young, first time buyers, and more evenly spread across wider age groups and those at different points in the housing ladder."
He added that negative equity needn't be a problem for the majority of households: "Negative equity will contribute to subdued property turnover, but otherwise should have few adverse effects for the majority of households affected," he said.
"Where people need to move house for job or other priority reasons, lenders can often be flexible to existing borrowers with low or negative equity, as long as their financial position is sound and they have a good payment track record."
Otherwise, Mr Pannell said, "sitting tight and building up savings
or overpaying on the mortgage are the strategies most borrowers are likely to adopt.
"It should be easier for households to rebuild their equity position than in the early 1990s, as low interest rates on their mortgage can help them to save or overpay more quickly."Get mortgage quotes and advice »
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