It's a question worth asking at the moment, especially when you consider the state of both the property and mortgage markets.
New data released by the Council of Mortgage Lenders (CML) has shown that 23,000 of you that took out 100% mortgages in the year to March 31 could see the amount you borrowed becoming greater than the value of your homes as prices fall.
A spokesman for the CML commented on the risk of negative equity for people:
"This in itself is not a problem as long as they are able to continue to pay their mortgage (as the overwhelming majority do) and in the longer term house price growth and capital repayments will take them back out of negative equity". "Clearly, we are in a period where we expect house prices to go down. But in the longer term, the market will continue to be underpinned by the shortage of property, house prices will go up again and people will move out of that position, even if they are nominally in negative equity."
However, the 23,200 people of you that took out those
100% mortgages represent only around
2.5% of the total
mortgages given out in that period, and a much smaller percentage of the overall number of
mortgages in the UK.
If a house loses its value it is not necessarily a problem unless you have to move or can no longer afford to pay your mortgage.
In a rising market banks are prepared to lend 100% mortgages as there is little risk of them not getting their money back.
Naturally, as house prices have been falling in recent months, the risks have increased and many mortgage lenders are turning you away if you don't have a decent deposit. These days a decent depoit is anywhere between 10% and 25%.
There is a warning that the situation may deteriorate further too as Michael Saunders, head economist at Citigroup said:
"House prices are down 6% in just the last five months, and the worst of the credit crisis; all that still lies ahead." He had originally predicted that house prices would fall by 15% in 2008 and 2009 but now he warns that the drop could be even greater.
Also, Howard Archer at Global Insight expects house prices to continue to fall for the foreseeable future. He said:
"Global Insight expects house prices to fall by 12% in both 2008 and 2009. We see significant downside risks to this forecast, particularly if the Bank of England does end up raising interest rates. "While we still expect the eventual next move in interest rates to be down, there is undeniably a growing risk that inflationary pressures could lead the Bank of England to raise them instead."
But don't worry, as despite hsour prices droping and a restricted mortgage market, there are still some
competitive mortgage deals out there.
Also, if you are worried about the effects of negative equity or are concerned about not meeting your mortgage payments, you should also speak free of charge to a debt adviser who can provide you with advice and solutions to help you resolve your debt and credit problems.
If you are struggling with your finances then do not panic. You can also seek advice and support from these organisations:
Consumer Credit Counselling Service
National Debtline
Citizen's Advice Bureau
Samaritans
Are you worried about negative equity and its effects on you?
If so, why not let us know what you plan to do about it?