First time buyers warned about negative equity

An online mortgage group has warned first time buyers about the risks of negative equity, after it revealed a rise in the number of people taking on 100% mortgages.

Between January and August this year around 33,000 first time buyers accepted loans covering the full value of their home, and it some cases even more than it was worth. This is according to figures from the online mortgage company mform.co.uk.

The company warned that people taking on 100% mortgages are particularly vulnerable to any fall in house prices. Any small fall in house prices would leave them owing more than their home is worth.

The warning comes the day after the Council of Mortgage Lenders predicted a 50% increase in house repossessions next year.

The Council of Mortgage Lenders said 45,000 could be repossessed next year, a level which has not been seen since the house price crash in the 1990s.

Francis Ghiloni, marketing and business development director at mform, said: “Rising property prices have meant that people need to borrow even more money to get the property they want. Lenders have responded to this by dramatically increasing the number of 100% mortgages available.

“In April this year, our research showed there were 92 different 100% mortgages to choose from. By October this had increased to 160.

”If house prices fall, homeowners with these mortgages are likely to encounter negative equity.”

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