Lending policies protect against negative equity


Wed 13th Aug, 09:45:17 BST

Recent policy trends in mortgage lending are protecting buyers from exposure to negative equity, according to the Council of Mortgage Lenders (CML).

The CML has said that the increasing size of deposits required for a new property is helping reduce the risk of negative equity.

It added that the average buyer paid a deposit of ten per cent last year, compared with the average 13 per cent deposit required to secure a property now.

And, despite preventing many first-time buyers from getting a foot on the housing ladder, increased deposit payments and long-term growth will ensure people get out of negative equity in the future, the CML said.

The CML reiterated that negative equity is only a problem if the buyer is forced to "crystallise this loss".

But negative equity and difficulty with mortgage repayments are not linked, according to the CML.

The Telegraph reports that negative equity is only a problem when buyers are forced to sell and those most at risk were people with consolidation loans on bad debts and credit cards.

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