23 Oct 2008

Some mortgages greater than value of homes

7:24 pm on 23 October 2008

Property analysts say negative equity cases are on the rise, as householders find their mortgage is greater than the current value of their homes.

A study has found 130,000 people with home loans may eventually find themselves in that situation.

Negative equity is the difference between a property's value and the amount of the home loan.

Property analysts say those worst affected are people who bought when prices rose between 2005 and 2007 and who borrowed more than 80% of the sale price.

Lincoln University professor of property studies Chris Eves has calculated that 130,000 homeowners will be in negative equity, with half or more already in that category.

Professor Eves says first-home buyers and investors purchasing below the median price could be badly hit, but it is a theoretical problem unless people need to sell.

The Bankers Association says all income brackets are affected and advises those struggling to contact their banks immediately.

A spokesperson, John Bishop, says its members have noticed an increase in negative equity cases among homeowners, but it only presents a problem when people cannot make mortgage repayments.