Owe more than your home is worth?

12 May 2009


The North East of England is being hit hardest by the negative equity situation caused by the housing price crash. There, approximately 10% of owners owe more than their house is worth. By contrast, in East Anglia and Scotland, the figure is closer to 1%. (the figure is approximately 4.8% in the UK as a whole). According to an Oct. 2008 article in the Telegraph, two million could get caught in the negative equity trap by 2010.

So what should you do if you are in this situation? Do you need to do anything at all? Here is what the Citizens Advice Bureau suggests:

1. If you are still able to make your payments, you should probably wait it out. According to a recent BBC story on the subject, if you can keep up with the payments until the market picks back up, you'll most likely come out fine.

2.The government recently launched the Homeowners Mortgage Support for borrowers suffering a temporary loss of income. This program can allow you to delay some mortgage payments for up to two years. You'll still owe the money, plus interest on it, but it is a much less catastrophic arrangement than losing your home. There are a number of qualifications, but two of them are:

  • having savings of less than £16,000
  • having less than £400,000 outstanding on your mortgage and any other loans secured against your home

3. Contact your local CAB before signing up for any mortgage "rescue" scheme. With some "sell and rent back" arrangements you could end up paying very high rent and even being evicted. Proceed carefully, in other words.

If you have any thoughts or suggestions on the issues regarding buying vs renting in the current climate, please leave your comments below.


  • Chris H.
    Fortunately for me I bought before the property boom, even with the recent drops in value my house is worth double what I paid for it 9 years ago - there are some advantages to living in the North East ;)
  • Ducky
    This is an intersting negative equity story: http://news.bbc.co.uk/1/hi/business/8039744.stm I love the fact that she dumped him, feels all guilty about it but meanwhile he's just stood there going "YES!! I HAVE THE BIGGER ROOM!!". :o)
  • Lumoruk
    That's good for you Chris but you're not who this story is aimed at, it's aimed at poor souls like me who has £20,000+ negative equity because we bought at the very pinnacle of the house boom. We have about £16,000k savings though so we will be alright
  • Mike H.
    Thanks for your smug comments Chris, It's actually thanks to people like you that others can't get on the property ladder. twat.
  • Noghar
    Same thng happened to me and the wife the last time this happened, in the 1990s. Paid £100k and a month later the house was worth about £90k. We sat tight, and five or six years later sold it for £125k. Now it's worth about... £350k? Even with the recession. So if you can sit tight, do, and think long term. And when the market recovers, and you find yourself dealing with some spotty teenage estate agent who is mouthing off about property being a surefire investment, remember to punch them in the face.
  • ABC
    Noghar, thanks for the positive information.
  • James R.
    This is so funny http://news.bbc.co.uk/1/hi/business/8039744.stm Right couple of wankers
  • Rich
    I think the key to this is not to panic, as the article suggests, as long as you can make the repayments on the mortgage you just have to wait it out and chances are it will work out in the end. If you have to sell, then yes your house will not be worth as much, but then, the house that you move into will also be lower in value. I am one of the lucky one's who still has enough equity in the house not to be in this situation, but I do feel for the people who struggled to get into the housing market, and are now sat in the negative equity trap. But mortgage rates are low at the moment making repayments more affordable and with the government schemes hopefully people will not end up loosing their homes that they have worked so hard to get. On a brighter note, at least the estate agents are suffering too with their lack of commission!
  • acecatcher3
    good time to b homeless.
  • Mike H.
    On another note Chris, even if your house is worth twice what you paid for it, if you sell, you'll still have to buy a house which has also doubled in price. You only make money if you have a number of properties to sell. So, to sumise, you haven't made any money on your house, there are still no advantages to iving in the north east, and you're still a twat, an utter one.
  • Nobby
    I'm a smug git. I sold just before the slump and moved location due to work. Stayed in a cheap hotel on the interest of the sale money, and bought seven months later for a great price.
  • goon
    Noghar it is not worth £350k thats just what you think its worth its only 'worth' that if some moron is willing to pay it in real life if you are honest with yourself it is worth probably £90k the average house price in this country should be 3.5x average earnings + 1x spouse earning which is 15k x 3.5 + 15k = £67500 and deep down you know this is the truth
  • ABC
    Government hasnt done shit for people with fixed mortgages! My payments are still the same as they were at peak.
  • Lumoruk
    ABC would you be saying that if interest rates had gone up? You take a gamble, I took a gamble to go with a variable tracker I'm paying £400-£500 extra on my mortgage because the money is available :)
  • Nobby
    ABC that is because you have a fixed mortgage. The clue is in the name. FIXED. You chose to fix it to protect yourself if rates went up, presumably realising that rates could also go down. I took out a 5 year fixed savings bond just before the slump (remainder of house sale / purchase as above). I have just over £20K earning 6.25%, a rate which lasts almost another three years. I took a risk that rates would not go up and fortunately it paid off.
  • Tony
    Regardless of what your house is now worth, it was obviously worth it at whatever cost you agreed to pay fir it in the first place IYSWIM? Pissing myself laughing at speculators that have been burned. Genuine people that have bought a family home have my sympathies - but if you're in it for the longer term, just sit tight - the house values will undoubtedly rise again, and if you're lucky, you'll break even with the eventual sale of your property, with a price at a sensible level, that will enable you to buy another property at an equally more sensible price.
  • Noghar
    Goon - you're right, it's only worth what someone will pay for it - but I wasn't boasting about the value - it's not my house any more and I don't live there. I was going on the asking price of houses in its area. But the whole houseprice thing is indeed a giant con and the only people who think houseprice inflation is a good thing is the Daily Express and fecking wanka estate agents.
  • ABC
    Obviously realising prices could go down, but was assured it was highly unlikely, (thanks mortgage advisor and tosser bankers and Gov). They help people in trouble and right off credit card and other commitments of people who spend more than they can afford, but wont help people with fixed rates (that keep their debt to a minimum) just because theyre barely able to meet payments. Surely they can change the rules slightly likely they did for first time buyers stamp duty and people that are in debt along with other things in the economy. But no, lets also take up the council tax, bike tax, car tax, insurances, drop pensions and increase cost of living and truly screw things up by not even making money available to them when they need it most because of these actions. Rant over.

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