Negative equity :-(

[jasminethecat]

I live in a 2-bed almost new-build (second owner) I bought in 2021 when the market was at its peak. I paid £190k for it.

Anyway, my neighbours on either side have recently sold, both were private sales to friends or family. I just went on the Land Registry and am upset to see one sold for £145k and the other for £130k.

Surely this will massively impact the valuation of my house? Most houses on this estate are 3 or 4 bed, hardly any 2 beds so not many other houses to compare with.

I really want to relocate next year when my mortgage is due for renewal, but I still have a mortgage of £156k and looks like I will be in negative equity.

What can I do? I feel so upset. I am single so just the one income, I was a first time buyer and feel so stupid like I overpaid massively for a house that I am now stuck with. I have a reasonable income, just over the threshold into the higher tax bracket, but not much by way of savings (they all went into my house deposit!) I feel so sad and stupid. I want to move to live near my sister and elderly mother, I am miles away from them and feel so lonely.

To echo pp private sales to family are often below market rate.

Just hold on and wait for things to improve. If you have to move then rent it out. You own a property which is good. I have several friends who are renting at age 60 and worried for their futures.

Hoepfully OP sorted things out given the thread is nearly a year old.

We bought our home at the height of the market in 2007. Had loads of buyers after it. Shortly after we bought there was the whole banking fiasco and the market really changed. We were in negative equity then and on an interest only mortgage. Now we are in the position of having a repayment mortgage and the LTV is 45%

if you can stick around, you can wait it out.

sadly loads left on mortgage length for various reasons but I’m comfortable with that.

argh normally check the date of first post. Didn’t this time. 🤦🏼‍♀️

Also generally house prices are low at the nadir of the market because interest rates are up, lenders are lending more conservatively, and/or jobs are at risk. And of course if you aren’t a FTB, your own house is also no selling.

So people often don’t have the option of buying at the low end of the market.

That was a year leading up to the global financial crash. It was caused in part by subprime mortgage lending in America. OP's issue is their mortgage in respect of two houses she knew about having sold at a loss.

@jasminethecat you're best staying put and keep paying your mortgage down. Overpay where possible, too.

Many landlords are also worried about their futures. Don"t rent it out, there are too many rules now that will trip you up, and with demand down you might not even get a tenant.

thenegotiator.co.uk/news/rental-market/buy-to-let-repossessions-jump-more-than-a-quarter-lenders-reveal/

The 2007 bailout (which was aimed at saving the bankers and their debt system, not specifically mortgage debt holders as many seem to think) won"t be repeated for many reasons, a main reason is that Japan are now raising rates, they are the second biggest bond market in the world!

Yes you made a mistake, new-build sales are down around 60% in some areas it seems, but you need to concentrate on positives if you can find some.

I agree with overpaying, if the OP is living alone maybe they could get a lodger to throw some extra money into the pot? Just get the mortgage debt paid down, that is good advice for everyone at the moment as this mess unwinds.
As you say it was only part about America, it was global, "Granite" the offshore company owned by Northern Rock was punting UK mortgage backed debt from high risk borrowers to gullible American investors packaged as "Triple A UK mortgage backed debt" LOL, you couldn"t make it up could you? No lessons have been learned though, meaning that the eventual bust is going to ruin far more people than it needed to.

Would be interesting if the OP popped back to update this rather old thread.

Never been in NE myself but I know plenty of friends & colleagues who have been over the years.
1990 was the first one, the value of my recently purchased house dropped but luckily my mortgage was very small (I bought with a huge deposit) but I knew people who had to just sit tight and ride it out. I think only one chose that time to sell (relationship break up) so they walked away with less than nothing.

2021 new builds were even more overpriced than is usual unfortunately. It was a strange time with lots of people overpaying on second hand property too.
As others point out you need a valuation but it probably won't be worth the 190k you paid. Particularly if it's not a true freehold and has management fees attached.
This will be the situation in lots of cases. The only thing you can do is focus on overpaying the mortgage as much as possible. Its a bit tough when the percieved propert "ladder" actually turns into a hungry snake - but it's always temporary and within a few years at most an up cycle will start again.

Estate agents will just look at completed prices locally for similar houses - do you know what the original listing prices were for the two that sold ? If you don’t need to move then just sit things out

I think it positive to remember that you have had four years in your own property rather than at the mercy of renting.

Hopefully things have changed for you over the last year @jasminethecat and you have sold or paid down more of the mortgage.

You would need interest rates cut to near zero again for an up cycle, that will be unlikely unless there is a very serious recession, the near zero rates ( to bail out the bankers) with no recession won"t happen again I don"t think.

Ouch
but realistically you could of been renting at £800 a month and that would of cost you 48k over 5 years

Interest free though with rent, you still pay interest on property losses, and if the lower bound price is the go to for valuations the OP has potentially lost 60k, and if you had a cheaper rental the interest free cost would have been a lot less and with more flexibility, you can leave a rental but you can"t walk away from a mortgage debt, I would go the lodger route and try to pay the mortgage debt down quickly.

Nothing like a positive spin on a bad situation

You would rather take the 60k loss?