Warning to new house buyers of negative equity risk

MORTGAGE experts are warning buyers to beware of negative equity as property prices soar in the scramble to catch the stamp duty holiday.

They fear the value of homes could drop later in the year leaving new homeowners owing more than their house is worth, at least in the short term, especially if they have taken out a 95 per cent mortgage.

It comes as research from First Mortgage shows that almost two in three first-time buyers are worried that their house would be worth less when they look to sell or move than the price they originally paid for it.

David Mcgrail, of First Mortgage, warned: “Whilst the stamp duty holiday offers potential for a great saving, the current high demand for purchase means that prices are rising above the savings which can be made.

“It is important for buyers to be patient and wait for the right opportunity to purchase rather than trying to beat the deadline.”

A further 42% of those surveyed, said negative equity was something they thought would cause them issues in the future.

Negative equity occurs when the outstanding balance on the mortgage exceeds what the property is valued at. While being in negative equity does not cause immediate issues, it does mean that homeowners will have difficulty remortgaging in the future, meaning they may lose access to the best rates on the market.