Homeowners in Negative Equity are Missing Out on Remortgage Opportunity
Take a look at the house price average in a particular region and you can make a close determination as to how homeowners are doing in terms of their property equity levels. Unfortunately there are numerous homeowners across the UK that could benefit from the low interest rate remortgages currently available from lenders but they cannot take advantage of the opportunities presented. Their lack of adequate equity or any equity at all is keeping homeowners from being able to remortgage.
The decline in house prices after the start of the recession left many homeowners watching their equity level dip and go into negative equity levels. This occurs when a property value falls below the level of the mortgage debt on the property. House prices have continued to decline with few small boosts this year that have at the most offset the previous declines. Growth in house prices and property values have been either flat or declining this year in all regions except for London. The year is expected to close with further decline in those same regions.
For those in negative equity the opportunity to remortgage is absent. As homeowners in negative equity have their current mortgage deal end they will be converted over to their lender’s standard variable rate which could prove to only add to the effort to pay down more debt. Lenders have been increasing their SVR interest rates and that means higher repayment amounts on mortgage debt. The effort to pay down debt and escape negative equity will be compromised by the need to pay higher monthly repayment amounts that will be paying toward more interest versus principal debt.
For those that find themselves in negative equity it is important to seek advice from qualified counselors and work to escape the situation. Remortgages are at some of the lowest interest rates seen in decades and the opportunity to get a lower interest rate could make a big difference in a homeowner’s budget.