People who took out mortgage before 2004 'are in the best position now'
Published On 28 April 2008
People who obtained a mortgage and got onto the property ladder before April 2004 are currently in the best position to weather the expected property downturn, a new report has suggested.Website Fool.co.uk revealed that it believed that property prices in the UK will drop by 20 per cent in the coming year, taking them back to the level they were in April 2004.
As a result, anyone who used a mortgage to purchase a property after this date will find they have made a capital loss.
However, the website stressed that this did not mean that anyone who brought a property in the last four years would suffer negative equity because "negative equity is related to the size of a loan taken out to buy a property".
David Kuo, head of personal finance at Fool.co.uk, added: "It is vital to differentiate between capital loss and negative equity.
"While a capital loss is beyond the control of homeowners, mortgage borrowers can overcome negative equity by reducing the size of their outstanding mortgage compared to the value of the property."
He also pointed out that the fall in house prices could be good news as it would "narrow the gap between the value of your home and a property further up the housing ladder" and make "up-sizing" possible.
