Property prices may struggle in the coming months if forecasts made by the Office for Budget Responsibility prove to be accurate. They recently found that property values could be set to fall by 2.4 percent and this could have an effect on corresponding mortgages.
Properties can often fall into negative equity when prices fall and it can prove to be a real problem.
It’s estimated that there are around 500,000 properties in negative equity in the UK, with houses bought in Northern Ireland being in particularly dire straits.
If a house falls into negative equity it can make mortgage movements particularly difficult.
Home-owners who want to remortgage, perhaps to a fixed rate or better deal, will likely find it very hard to do so.
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Fortunately, there are actions people can take to reduce negative equity.
So long as the person can afford it, they can try to overpay their mortgage to reduce the problem.
Before this is done, they’ll need to check with their lender that they can make overpayments and if they can, they should look into how much they can overpay without levying an early repayment charge.
Those looking to do this can use online mortgage overpayment calculators, of which there are plenty of free-to-use options from mortgage brokers and lenders.
If this option is taken, mortgage holders will need to keep an eye on interest rates.
The Bank of England have set the base rate to 0.1 percent and correspondingly, lenders have kept their own rates very low.
However, if interest rates rise it may make mortgage payments unaffordable.
This could be especially concerning for those in negative equity as their home could be repossessed.
Currently, those who are struggling with their mortgage payments can take advantage of a mortgage “holiday”.
So long as a person’s income has been affected by coronavirus, they can effectively pause their repayments by up to three months.
These holidays can be utilised for a number of mortgage arrangements, including buy-to-let plans.
To request a holiday, the mortgage holder should contact the lender to arrange the details, they should not simply just stop paying their mortgage without notice.