House Doctor: 'We've just bought our first home – but are we at risk from negative equity?'

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The Independent Online

Question: Having just bought and moved into our first home, we can't believe Nationwide has announced falling consecutive monthly property prices for the first time since early 2009. I know there's talk of a double-dip recession, but are we really in danger of having bought at the height of the market again? We saved a near-£30,000 deposit since 2004 to buy our house and can't afford to lose it if values drop like a stone. Have we made a mistake?

Martin Selcombe, Wakefield

Answer: The monthly movements of the myriad property-prices indices – from Nationwide to Halifax and Rightmove to Hometrack – can set pulses racing.

The problem lies in the abundant supply of indices and, crucially, differences between them which aren't usually put into context, leading to much consumer confusion.

For example, while Halifax and Nationwide scrutinise monthly mortgage approvals, Rightmove analyses asking prices and Land Registry records of final sale prices. Each of these carries its own flaws: mortgage approvals regularly fall through later in the process; asking prices might be a market bellwether, but can swing wildly; and completion prices, while factually correct, are the slowest to emerge.

For example, in your case, you've spotted the gloomy Nationwide announcement of a second monthly fall (0.9 per cent down in August), but, just days later, Halifax declared a somewhat rosier outlook, with prices up by 0.2 per cent.

This may be confusing, but you can still work out if you've made a mistake. The answer lies with your mortgage, and why you bought your home in the first place, says Melanie Bien at broker Private Finance. "As long as you can afford your mortgage, you haven't made a mistake," she says. "Provided you stay put for a few years, which should be your intention when buying a home anyway, then prices tend to recover over time."

Short-term obsession with house price indices prompts far too many people to forget exactly why they bought a property in the first place, adds Andy Montlake at broker Coreco.

"Buyers lose sight of it as a home: as long as the property is one you want to live in for a period of time, and the loan is affordable, the fluctuations in prices shouldn't be an issue in the short-term," he says.

Trying to predict the highs and lows of the property market has always been fraught with danger; and, in reality, only hindsight proves if it was a good or bad time to buy.

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