Residential Conveyancing News

Yet more positivity for the UK Housing Market - What does this mean for people who are in negative equity? Joanne McNally

You will recall from our previous article published in June 2009 that we advised of the apparent upturn in the residential property market. It would appear that the figures and trend continues to make for positive reading. According to the Nationwide building society, Britain's house prices increased by 0.9 per cent in March, the first increase for 16 months.

It is reported that the rise pushed the average cost for a UK home above the £150,000 figure - by £946. The society says the increase means the annual rate for house price falls reduced from 17.6 per cent to 15.7 per cent.

This can only mean good news for those people who already have their foot on the property ladder as there were widespread reports that more and more homeowners were in a position of negative equity. Negative equity occurs when the homeowner obtains second-mortgages or loans secured against the property, so that the total loans exceed the value of the property. As a result of default under the mortgage or loan, repossession and sale of the property by the lender will not raise enough cash to repay the amount outstanding, and the borrower will both have lost the property and may still be in debt.

Where a situation like this arises, if the lender does not recoup all monies owing to them they are able to pursue the debtor on a personal level which may result in bankruptcy proceedings being brought against the debtor. Lloyds said that 20 per cent of the mortgage customers in its business - which includes Halifax and Bank of Scotland - were in negative equity. But it believes that the rate of repossessions has already peaked. House prices plunged by nearly 23 per cent between August 2007 and April this year.

With the rise in property values we should see a gradual reduction in the number of home owners who are in negative equity and repossession proceedings being brought about, so long as the home owner does not raise further finance to be secured against the property.

Hopefully the number of people in negative equity will start to reduce in the early part of next year, as it is speculated that 2010 would see the first annual increase in house prices for three years - around two per cent. Low interest rates appear to be luring people back to the market and conditions appear to be stabilising.

Halifax has already fuelled talk of green shoots by showing that prices in July were up 1.1 per cent on June. Halifax's comments have been echoed by housebuilder Taylor Wimpey who said the worst of the property market slide was over. It is reported that the firm is preparing to open 34 showrooms across the UK ahead of a recovery despite first half losses of £68.9million. It is further reported that orders for new homes are up 67 per cent since January.

All in all it appears that the market is showing steady signs of recovery and we at Lees will continue to monitor the changes. If you are looking to sell or purchase a property, please contact the property department at Lees Solicitors LLP on 0151 647 9381 where we will provide an estimate of our legal fees together with a breakdown of the additional search fees required in each case. This will enable you to budget properly for your transaction. Alternatively please email us at info@lees.co.uk

Joanne McNally

This article provides a summary of a recent case/change in law/news item. It is intended for general information purposes only and is not to be relied upon. It does not constitute legal advice and should not be treated under any circumstances as a substitute for legal advice. Lees Solicitors LLP does not accept any responsibility for any loss that may arise from reliance upon the information contained within this article. The copyright in this article is owned by Lees Solicitors LLP and permission must be sought before reproduction or publishing.

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