FTBs run risk of negative equity

Thousands of first time buyers (FTBs) are running the risk of getting into negative equity, according to mform.

The firm claims that 33,000 people took out 100 per cent mortgages between January 2006 and August 2007, and these borrowers are most at risk of getting into trouble should house prices fall.

Negative equity comes about when a borrower's mortgage is worth more than the value of the home and it means that the owner cannot upgrade to a more expensive property.

"Rising property prices has meant that people need to borrow even more money to get the property they want and lenders have responded to this by dramatically increasing the number of 100 per cent mortgages available," said Francis Ghiloni, marketing and business development director at mform.

"In April this year, our research showed that there were 92 different 100 per cent mortgages to choose from, but by October 1st this had increased to 160.

"However, if house prices fall, as some commentators predict, those homeowners with these mortgages are likely to encounter negative equity," he added.

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