Nine in 10 recent homebuyers are concerned that housing market changes could reduce their equity, despite most believing their property has risen in value.
Research by mortgage broker Boon Brokers found that 91% of people who bought a home with a mortgage in the past five years had some level of concern about a loss of equity.
Almost half, 47%, said they were very or extremely concerned, while 9% reported having no concerns. Some 44% believed they could enter negative equity during their current mortgage term.
The survey of 1,000 UK homebuyers also found a divide between confidence in present property values and expectations for the future.
Overall, 58% of respondents believed their property had increased in value since purchase, while 24% thought its value was broadly unchanged and 17% believed it had fallen.
Despite this assessment of current values, concern about future equity remained widespread.
YOUNGER BUYERS REPORT GREATER CONCERN
The perceived risk of negative equity was greatest among younger buyers. More than half, 56%, of those aged 25 to 34 thought they were likely to enter negative equity during their current mortgage term.
This fell to 51% among buyers aged 35 to 44, 26% among those aged 45 to 54, 21% for those aged 55 to 64 and 15% among buyers aged 65 and over.
One in five buyers aged 18 to 24 said they were extremely concerned that changes in the housing market could reduce the equity in their home. The equivalent figures were 13% among those aged 25 to 34, 14% for buyers aged 35 to 44, 9% for those aged 45 to 54, 3% for those aged 55 to 64 and 6% among respondents aged 65 and over.
The research did not examine the reasons for the differences between age groups.
Gerard Boon, managing director of Boon Brokers, said: “These findings outline that younger homebuyers today are thinking far beyond simply getting onto the property ladder.
“They’re considering how future market conditions could affect the equity they build over the lifetime of their mortgage.”
LONDON BUYERS FEAR EQUITY LOSSES
Concern also varied by location. In London, 51% of respondents believed entering negative equity was either very or fairly likely during their current mortgage term, compared with 49% in Nottingham, 48% in Birmingham, 35% in Manchester and 27% in Leeds.
Some 57% of London respondents were very or extremely concerned that market changes could reduce their housing equity. The proportion was 50% in Birmingham, 49% in Nottingham, 34% in Leeds and 30% in Manchester.
Only 5% of respondents in London said they were not concerned about a reduction in their equity, compared with 6% in Manchester, 11% in Birmingham and 15% in both Leeds and Nottingham.
MORTGAGE PAYMENTS REMAIN THE BIGGEST SINGLE WORRY
Higher mortgage repayments were named as the single biggest concern about the current housing market by 33% of recent homebuyers.
Negative equity was selected by 24%, followed by falling property values at 14%, being unable to remortgage at 11% and difficulty selling a property at 9%.
Although higher repayments were the most common individual answer, the two equity-related responses — negative equity and falling property values — accounted for a combined 38%.
The results suggest that recent buyers remain relatively confident about the present value of their homes but are less certain about their ability to preserve that equity over the remainder of their mortgage terms.
