Mortgage shortage and negative equity 'trap' 3.5m
As many as 3.5 million households cannot move because of mortgaging lending restrictions or low and negative equity.
Mortgage broker John Charcol estimates there are two million households in negative equity or less than ten per cent equity.
A further 500,000 households have ten to 15 per cent equity.
It is estimated one million homes are on sub-prime or self-cert mortgages.
In the current mortgage market, finding a mortgage deal with a high loan-to-value level or for those with poorer credit histories is proving hard - and those that do qualify face substantially higher interest rates.
Ray Boulger, at John Charcol, said: "When most people move they rely on the equity in their property to provide the bulk of the deposit required for their new property, which is currently a minimum of ten per cent in most cases, plus moving costs, of which stamp duty land tax is often the biggest.
"Having such a large number of households who are currently unable to move is not only a serious problem for the people concerned, but also has important macro economic consequences."
Mr Boulger also hit out at lenders carrying out a full credit check on borrowers when offering a decision in principle, rather than when dealing with the full application.
He claimed this leaves a footprint on a person's credit file and results in them not being able to shop around.
"Lenders are required under FSA rules not to do anything to inhibit consumers shopping around, but most have been riding roughshod over this requirement," he said.
"Avoiding contravening this rule is very simple - all a lender has to do is to refrain from recording a full search but instead do a quotation search, which provides the same information, unless and until they receive a full mortgage application."
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