Housing equity 'insulating buyers' from price crash
Mortgage lenders are moving to ward off fears over a housing prices crash, arguing homeowners are insulated against shifts in the market.
The Council of Mortgage Lenders - which represents the interests of 98 per cent of mortgage lending in the UK - argues outstanding mortgage balances are dwarfed by unmortgaged housing wealth held by homeowners.
As such, although the position of individual households may vary substantially, the amount of unmortgaged housing equity leaves the vast majority of UK homeowners in a strong position to cope with a change in their circumstances.
"Data on the aggregate balance sheet position of households shows that the finances of homeowners are strong and healthy, even among those borrowing with a mortgage," said the CML in its weekly News & Views publication.
"We recognise the financial position for individual households may vary. Overall, however, the strong reserves of wealth built up by home-owning households will underpin the finances of the vast majority in a variety of different circumstances."
The CML was responding to findings earlier today from the Halifax, which show house prices dropped at the fastest rate for 15 years during March.
Research from the CML shows unmortgaged housing wealth in the UK has more than trebled in the last ten years.
It presently totals almost £2.5 trillion, more than twice the value of mortgage balances outstanding £1.1 trillion.
As such, if the CML housing market forecast is correct this year, and prices remain broadly flat, free equity held by home-owners would account for 68 per cent of total housing wealth at the end of 2008, and 45 per cent for mortgage customers.
Even those commentators who have been more bearish in their forecasts, including Global Economics which increased its prediction from a five to eight per cent fall this week, are proved correct there will only be a "modest impact on overall levels of housing wealth".
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