Homeowners Stuck in Negative Equity Out of Reach of Cheap Remortgage Deal
The lending criteria have relaxed somewhat when it comes to remortgaging. If a homeowner wants to remortgage they can usually do so even with bad credit as long as they have adequate equity. There lies the problem for most homeowners. They go in to seek a remortgage and along with it the security of a lower interest rate for the years ahead only to be told they cannot do so because they not only do not have enough equity but they are in negative equity.
Negative equity basically means that the property is not worth as much as the debt on the property. Due to falling house prices and declines in property values owners have found themselves in negative equity. There are a high majority of these homeowners in the group that bought just prior to the credit crisis. According to a recent report from HSBC revealed that approximately 360,000 homeowners in the UK are currently in negative equity and therefore stuck in their current homes and unable to remortgage or move.
Remortgages are currently at very attractive rates and it is unfortunate that those that could benefit from a remortgage cannot if they do not have access to the cash needed to cover the lack of equity in a deal.
Peter Dockar, the head of mortgages at HSBC remarked, "These findings highlight the fact that first-time buyers can no longer rely on rising house prices to provide them with the deposit they need for their second purchase. They need to save or make overpayments on their existing mortgage if they want to move up the housing ladder."