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Property/DIY

Negative Equity rears its head again...

9 replies

WideWebWitch · 22/03/2008 19:27

here although they borrowed far far more than the price of their house as a loan so erm, they were over stretching themselves.

OP posts:
hermionegrangerat34 · 22/03/2008 20:11

ERm - yes - if you borrow more than the value of your home you will be in negative equity, won't you.... Bit different to prices plummetting so you end up in a -ve equity situation when you thought you had a good equity cushion.

wheresthehamster · 22/03/2008 20:33

Are people insane?? How could you borrow more than the price you bought your house for without foreseeing difficulties? Can't anyone see past the greed of the mortgage lenders? Do borrowers think house prices will rise indefinitely? Do they think the government will bail them out?

camillathechicken · 22/03/2008 20:36

yes, they overstretched themselves massively and that is not the fault of northern rock or the government.

it is a horrible situation ,but not the same as a 90 % mortgage and then house prices plummeting massively

WideWebWitch · 22/03/2008 20:40

Oh I agree, bloody stupid. And if you add £30k to your mortgage based on the fact that your house will go up then well, you are going to be in trouble.

I don't think they're alone though. And I realise it's not the same as paying £100k for a house and owing £95k and it being worth 2p!

OP posts:
princessosyth · 22/03/2008 20:45

Our finances are in a mess at the moment and we stupidly have a mortgage which is higher than the price we paid for our house. Fortunately our house is worth £100k more than our mortgage so we are not in a negative equity situation but I can see how it happens.

Eddas · 22/03/2008 20:47

it's madness that they were allowed to borrow that much against a house not worth that much.

I don't understand people.

TheDuchyEggOfNorksBride · 22/03/2008 21:03

The banks have been greedy and some people have been foolish. However, the property market does need a massive cool down and that means there will be victims. It's harsh but it happens and people do recover from it.

People should remember too that it usually costs a great deal of money to sell & move house too, so a small amount of equity in a house will soon disappear.

I am amazed at what some of my friends have borrowed.

alfiesbabe · 23/03/2008 10:45

Agree. There's no doubt the banks have been greedy, but people have been greedy too - thinking they can borrow exorbitant amounts of money and never thinking about the fact that things might go wrong. In the particular case of the couple in the article, it doesnt sound the worst case scenario, because the mother only works part time, so there is the potential to increase their earnings, and their children are 3 and 4, so almost school age. It must be tough, I'm not saying it isnt, but I still think it would be a lot tougher if they had a newborn for instance.
Those of us 40 somethings will remember the days of 15% interest rates, and the huge property crash of the late 80s, so in a way, nothing shocks me now. Mortgages are still incredibly cheap compared to what they used to be, and although there's a downturn in the market, it's not on the scale of 20 years ago. I guess the message is, just don't over stretch yourselves; plan ahead and never ever borrow more than your house is worth.

noddyholder · 23/03/2008 11:42

people who have repeatedly remortgaged to pay off debts and buy 'stuff' are going to be in for a shock if the surveyors revalue their houses at less than the mortgages.

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