Thousands trapped as negative equity hits home sales
Homeowner ambitions to move up the housing ladder are being curtailed by negative equity, new mortgage figures suggest.
According to the Council of Mortgage Lenders in Northern Ireland, just 800 loans were given to borrowers moving house in the first quarter of this year, down from 900 in the first quarter of 2012 and 900 in the fourth quarter of last year.
CML said lending to first-time buyers and those looking to remortgage also fell in the first quarter, though that reflected seasonal trends, according to the council.
Around 1,200 loans were advanced to first-time buyers in Northern Ireland in the first quarter, a seasonal drop of 14% compared to the fourth quarter of last year and a fall of 8% compared to the first quarter of 2012.
Average house prices have slumped around 56% from their peak of around £240,000 in 2007 – and while good news for first-time buyers, the falls were not helping potential home-movers.
A spokesman for the CML said: "While steeper house price falls in Northern Ireland have helped first-time buyer activity, home movers have seen a reduction in their housing equity, decreasing the deposit available to them to put towards a higher-priced property further up the housing ladder."
Just 40% of home purchase loans in Northern Ireland in the first quarter of the year were for home movers, compared to 56% in the UK overall.
Ulster Bank chief economist Richard Ramsey pointed out that at 1,000, the quarter had seen the lowest number of remortgages since CML remortgage data began in 2005. That compared with a quarterly peak of 8,700 in the second quarter of 2007, when house prices were also peaking.
Mr Ramsey said: "This is not really surprising given the average house price falls of 55%+ that have already occurred.
"For many households this has significantly eroded the equity previously held within a property. As a result, many households are not in a position to remortgage their home to fund improvements or extensions or they are reluctant to do so."
Home-movers were not reaping any benefit from the activity at the bottom of the market, he said, suggesting first-time buyers were buying new-builds.
The fall on the same period one year ago could also be due in part to the end of the stamp duty holiday in March last year, CML said.