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Up to 450,000 London homeowners are now stuck in their properties, unable to move because they cannot get a new mortgage to replace their existing loan.
Ray Boulger of independent mortgage brokers John Charcol blamed negative equity for most of the problem. But mortgages of more than 100 per cent and self-certified loans based on unrealistic earnings are other causes.
As a result of the credit crunch, very few mortgage deals are now available for people with less than 15 per cent equity in their homes. Mr Boulger launched a scathing attack on the financial services minister Lord Myners, who recently told the Treasury select committee that there is a "very competitive market for mortgages". He said: "It's extremely worrying that someone who is helping to shape government policy has such a dangerously naive understanding of current conditions."
At the same time, the average asking price for houses in London's most expensive areas has plummeted over the summer.
Kensington and Chelsea saw a drop of more than £100,000 between July and August while the average price in the City of Westminster fell by more than £57,000.
Across London, the average reduction was about £15,000.
Reader views (8)
WOW!!!! So many armchair economists here. Perhaps you'd share your financial wisdom and submit a detailed economic proposal on how to improve our finances in the UK without screwing ANYTHING up? Nah! Didn't think so. You're just the pub bores that people avoid!!!
- James, London, 18/08/2009 13:14
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I bought a flat in Islington about ten years' ago. I now work in the public sector and earn a modest salary. I want to move out to another borough in London, but due to Labour's tax grab, for me to move flat would cost me nearly 11,000 pounds in stamp duty - the price of a small car??????????????
Dominique, if you bought a flat in Islington in 1999 you would be sitting on a near 65% profit, which would in my mind equate to at least £100k. Why would an £11k tax bill stop you moving?
Property quite rightly is falling,not as quickly as it should if you ask me. But anyone who brought in 1999 is still sitting on a huge surplus and should be able to use this to their advantage in this market. Remember, cash is king. Unless you've remortgaged a few times, to buy TV's,holidays,cars etc!!!!
- Bruce, London, 18/08/2009 04:30
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HIPS report anyone?
- Jacqueline, Hampstead, London, 17/08/2009 23:41
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Thank God I got out when I did, though it was only because I didn't have a mortgage on the property I was selling and that the sale price (which was eventually around £27k less than the price at which my house was originally marketed) paid for the property I bought in Norfolk. That's the only way, folks.
- Judith, KIng's Lynn, Norfolk, UK, 17/08/2009 23:36
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I bought a flat in Islington about ten years' ago. I now work in the public sector and earn a modest salary. I want to move out to another borough in London, but due to Labour's tax grab, for me to move flat would cost me nearly 11,000 pounds in stamp duty - the price of a small car. It used to be 1% on all properties under the tories for any property. So now I'm stuck where I am due to Labour's gradually raising stamp duty. What riles me is this will only go to finance their profligate fiscal policy, namely financeing nhs torists from abroad and creating welfare dependency to sure up their vote. Can we please have an eclection now.
- Dominique, london, 17/08/2009 16:04
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On Friday we had a report of improving market conditions.Today we are told a sobering truth which reveals the real consequence of the false Brown boom.Wasn't it Gordon Brown who condemned negative equity traps in the early nineties as a result of economic mismanagement.Funny, he's very quite on the subject now. Keith Price of Luton....your comments please.
- Andrew Nicholls, Ely ,England, 17/08/2009 12:17
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Labour out of touch? Never??!!!
- Mike Jones, London, 17/08/2009 11:41
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it will get worse before it gets better - another 5 yrs of this downturn to start improving. (if we are lucky) and more and rising unemployment will put further pressure on houseprices and affordability.
- Ancient Wisdom, London, 17/08/2009 10:46
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