Letter: Positive side of negative equity

Sir: The assertion (6 December) that one in four people who bought their homes between 1988 and 1991 have negative equity is not likely to do anything to improve the already fragile housing market. In an effort to pierce that gloom to some degree, I would like to paint a somewhat different, but no less economically and statistically valid, view of the negative equity position in the UK for 1993.

The number of families whose mortgage exceeded the value of their home rose to a peak in the first quarter of this year at 1.8 million. Since then there has been a substantial decline, which by the third quarter reduced levels by some 24 per cent, 438,000, across the UK as a whole. The single largest fall, 72,000, was in the South- east (excluding Greater London).

With around 1.36 million homeowners still the victims of this housing scourge, no one can suggest, however much we might like to, that this problem is going to evaporate in the short term. But, with the trend firmly downward, and other economic factors directly linked to the housing market set fair, I anticipate that a steady decline in negative equity will continue into 1994. It will take some time, a 5 per cent increase in house prices being required to release a further 500,000 borrowers from the trap.

Yours faithfully,

PETER ROBINSON

Managing Director

Woolwich Building Society

Bexleyheath, Kent