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Families in neg equity flats will walk

Friday, August 17 10:46:57

Negative equity will be with us for at least another ten years and, unless the banks come up with a plan that doesn't penalise mortgage holders the problem will get worse with, for example people trapped in unsuitable apartments simply walking away.

That's according to Kevin McNerney of the Trusted Advisor Group, who added that with independent rating agencies predicting that house prices will fall by an average of 60pc, the Government and Central Banks need to put in place a mechanism which will allow people in negative equity to move through rental without being penalised by tax or by the withdrawal of tracker mortgages.

"At present, there are only small number of banks who are officially offering Negative Equity Mortgages. This means that if you are with one of these lenders and want to avail of it but don't meet their lending criteria for the new loan then you cannot try other lenders to see if they will approve you. Banks are only concerned about their own loan books and will not take negative equity from another lender just to get business," he said.

Mr McNerney added that some banks have had this product available to them since mid-2011 but have announced recently that the number of customers who are eligible for this product is very limited.

"Other banks in the market are currently looking at the merits of this product to see if it would benefit their customers, and more importantly themselves, but some say they have no intention of introducing it. In fact, a person in one of the banks went as far as saying that the "100pc mortgages are what got us in to this mess so what makes people think that 125pc mortgages are going to get us out of it."

The Trusted Advisor Group says it believes that the demand for negative equity mortgages structured in the right way would be high. There are a significant number people who are currently living in a negative equity property that no longer suits their needs. For example, they live in a one or two bed apartment and they now have children. The property experts believe that if these people were given the opportunity to live in a property that would be more suited to their needs, albeit still in negative equity, most would jump at the chance. There's a real risk that these exasperated new families will be forced to walk away from their apartments triggering far greater losses for those inflexible banks, it says.