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Most FTBs expected to avoid negative equity
29 April 2008 11:30
Most first-time buyers (FTBs) are not at risk from negative equity, an advisory firm has claimed, but this spectre is unsurprisingly causing much concern in the property market.
The issue of negative equity has prompted much debate of late, with a recent report by Morgan Stanley warning that house prices could fall by 15 per cent over the next two years, leaving 2.1 million people with homes worth less than the mortgages on them.
Yet Alexander Hall spokesperson Andy Pratt has played down this threat, insisting that the only borrowers at real risk are FTBs who obtained 95 per cent loan-to-value (LTV) mortgages last year and that anyone who took theirs out earlier should be fairly safe.
Nonetheless, he noted that negative equity fears were dissuading people from buying a new home for now and understandably so, given the scale of this commitment, but he also argued that most industry experts expect a price drop of no more than five per cent.
Mr Pratt's advice to FTBs was to weigh up the different possible price movements with the duration they plan to spend in their property, yet he also stressed that buyers would already be reducing their LTVs by making repayments on a mortgage rather than renting.
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