Negative Equity Reality

The Financial Services Authority has warned that one in four UK homeowners will be plunged into negative equity. If correct this will affect 2.5m of us this year alone.

To see the value of your home drop to less than the amount you owe the bank is only relevant if you have to sell property quickly. Previous generations have lived through negative equity without any affecting on their life and have sold their properties with substantial equity gains years later.

We might have seen an unsustainable housing boom fueled by reckless lending over the past decade which should never have been allowed to happen. But it did and most homeowners benefited greatly from the equity gained fulling purchases of luxury items and holidays. Many also believe that negative equity will turn into possitive equity sometimes in the future.

However sorting out negative equity might take longer than you think. With worsening unemployment  figures and declining economy it could take years, if not decades to sort out.

Eviction notices and house repossessions are likely to increase in the meantime. A survey from Which? shows 35% of homeowners are worried about being repossessed.  With worse case forecasts showing further house price falls of 55%, 35% house repossessions might soon ne the reality.