Rising house prices release 600,000 from negative equity

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GENTLY rising house prices have released 600,000 homeowners from the negative equity trap over the past year and the number will fall below a million by the summer, according to Woolwich Building Society.

Negative equity - where the size of the mortgage is greater than the value of the property - has virtually disappeared from the North. Greater London, the south-west, West Midlands and Yorkshire and Humberside saw improvements in the first quarter. But the South- east, East Anglia and East Midlands remained about the same, while the position worsened in the north-west where house prices fell.

Woolwich predicts prices will rise 5 per cent this year, with a further 450,000 households emerging from negative equity. The average is pounds 7,500 per household. There are 1.1 million households - 7 per cent of all owner-occupied homes - with negative equity.

Peter Robinson, managing director, said: 'Negative equity is clearly on the way down and out. It will virtually disappear over the next couple of years.'

Homeowners, whose budgets have been eased by falling interest rates, are also repaying mortgage debt. In 1990, building societies received pounds 1.5bn in lump-sum payments. This rose to pounds 2.5bn last year.

John Wriglesworth, housing analyst with the stockbroker UBS, said homeowners needed at least 10 per cent of the value of a new property to move to cover the deposit and pay for estate agents, surveyors and legal fees.

'One in four homeowners in the country have insufficient equity to move. Some 2.5 million people have seen their castles turned into prisons.'