Mortgage Clinic: 'Is this the wrong time for shared ownership?'

'Is buying a shared-ownership property in this current climate a safe move? If property prices fall, will it be a good idea for me to have only bought a percentage of the full price, or will I effectively be in negative equity with the share that I owe?' KW, by email

Your worries about falling house prices are being voiced often in the mortgage clinic. Only last week, the Council of Mortgage Lenders suggested that the decline – down 2.4 per cent in May, the Halifax says – could have pushed 23,000 homeowners into negative equity.

To be sure, it was only talking about those who had taken out 100 per cent home loans in the past 12 months, but it was enough to spark a fresh bout of jitters.

For buyers, there's understandable caution, but a shared-ownership deal may actually create an opportunity. These deals see you buy a share in a property (usually 25, 50 or 75 per cent) with a mortgage and deposit – but the remainder is retained by a housing association, to which you pay rent for "letting" the space. Later, you can buy the rest of the house in stages, or "staircasing", when it's more affordable.

In a falling market, the percentage you buy will affect how much you feel the negative equity, says Ray Boulger at broker John Charcol. "You'll suffer a proportionate loss but whether you'll be in negative equity depends on how far the property value falls – and how big your mortgage is in relation to the share of the property you buy."

So if you borrow a 95 per cent share of the property, you're more likely to go into negative equity than if you only borrow 80 per cent.

On the other hand, says Melanie Bien of broker Savills Private Finance, the falling prices would offer you a cheaper way to buy the rest of your home. "Assuming the price remains reduced, when you 'staircase up' and buy further shares in your house, you will be doing so at the reduced value – so it will work out cheaper."

Richard Morea at broker London & Country adds: "Lower house prices will mean that the value of your existing share in your property will also have fallen."

This is true, according to Rob Clifford at broker Mortgageforce, but he says: "Remember that house-price inflation is likely to return and in the medium-to-long term, people will still see their property value increase."

If you do go ahead, research your mortgage thoroughly, because many lenders won't now lend on a shared-ownership basis.

It might not be much reassurance right now, but negative equity is only a serious problem for you if you need to sell.

Send us your questions and you could receive £50 to spend at Amazon

Foxed by jargon? Worried by the credit crunch? Email a question to mortgageclinic@independent.co.uk. We will not reveal your identity, and we cannot give specific advice. If your question is printed, you'll receive a £50 voucher from Amazon.co.uk, so you can kit out your home with anything from a lawnmower to an espresso machine. mortgageclinic@independent.co.uk