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What is negative equity?
How does negative equity happen?
People often find themselves in negative equity due to falling house prices. When prices fall, the number of households in negative equity tends to rise. It’s a bigger problem during recessions, when house prices can experience bigger drops.
Negative equity example
Bill bought a house worth £180,000. He did this with a £20,000 deposit and a mortgage of £160,000.
After two years of living in the property, he’d paid off £10,000 of his mortgage.
He got his house valued again – and found that it was now worth £100,000.
He still owes £150,000 on his mortgage and his house is now worth £100,000, so he has negative equity of £50,000.
The content on this page is for reference and does not constitute finance advice.
For impartial financial advice, we recommend government bodies like the MoneyHelper.
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