Friday, November 9, 2007

Negative equity warning for 35,000 borrowers

UP to 35,000 households face the prospect of falling into negative equity after a new report warned house prices will plummet by 8pc next year.

Many of the affected homeowners will be left servicing a mortgage that is greater than the value of their home.

The gloomy scenario emerged after a report by Goodbody's Stockbrokers said the average value of homes would drop by 5pc this year -- meaning a drop of 13pc in just two years.

Goodbody chief economist Dermot O'Leary said the slide into negative equity would affect mainly those who took out 100pc mortgages, which were first introduced at the end of 2005. These were mostly snapped up by first-time buyers.

Mr O'Leary attempted to play down the potential impact on homeowners. He said: "It only becomes a problem if the mortgage becomes unaffordable."

However, the news will come as a serious concern to households who are already struggling to cover the cost of rising mortgage repayments.

The report also predicted house completions will fall from 90,000 this year to just 50,000 in 2008 -- 10,000 fewer than previously estimated.

The Irish Independent

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