Tuesday, 9 August 2011 12:10 PM
Mortgage borrowers across the UK are sitting on a substantial cushion of equity in the form of their homes.
According to the Council of Mortgage Lenders (CML), the aggregate loan-to-value ratio on mortgaged property in the UK is less than 60 per cent.
The research shows that, even allowing for recent house price weakness, the vast majority of individual borrowers still hold sizable wealth in their homes.
Nearly half of existing borrowers have outstanding mortgage debts equivalent to less than 70 per cent of the value of their home, while a further quarter have an equity cushion of between ten per cent and 30 per cent of the property's value.
This means that borrowers hold a total unmortgaged housing wealth of around £800 billion.
The CML research also shows that the number of borrowers in negative equity today is broadly comparable with 2008.
The research suggests that 827,000 households had some negative equity in the first quarter of 2011. The extent of negative equity in the current downturn, however, does not compare with the early 1990s, when it is estimated that the number of households experiencing it peaked at 1.6 million.
Some parts of the country have seen greater weakness in house prices in the current cycle and are therefore more likely to have borrowers in negative equity. Northern Ireland, Yorkshire and Humberside and the North-East of England are in this category.