Larne home owners in £100,000 mortgage trap

The nightmare scenario of seeing up to £100,000 wiped off prices paid at the height of the property boom has led to repossessions and even bankruptcy, said local estate agent Ken Sives.

A national survey carried out by HSBC has revealed that falling house prices have trapped more than 350,000 first-time buyers in properties bought at the peak of the market. The report added that young people across the UK buying their first home have seen an average of £11,000 wiped off the value of their properties since 2007, meaning many are in negative equity (with a mortgage that exceeds the value of their home) and unable to make the move to a second, bigger property.

The survey quotes an average 42 per cent crash in Northern Ireland, but Mr Sives believes the deficit is as much as 60 per cent in some parts of Larne.

“The survey would tie in with the figures we produce and is probably about right across the whole of East Antrim, although Larne town itself has probably seen prices fall more than the average figure quoted,” he said.

“Looking back, we sold a mid-terraced property at the height of the market in late 2006 in Craighyhill for £132,000. The same property today would probably be worth around £50,000 at best – a decrease of just over 60 per cent.

“Likewise, a property in the Harbour area of Larne, sold for £169,000 in early 2007, would at best probably be worth around £70,000 – a decrease of almost £100,000 – or in percentage terms a decrease of just under 60 per cent.”

It was quite common for first-timers to take out 90 per cent mortgages at the time. That would be a £118,800 loan on a purchase price of £132,000. Mr Sives calculated: “Even taking into account repayments made since the mortgage started, it is likely the amount owed would still be above £100,000 – meaning negative equity to the tune of around £50.000.”

He added: “I think this is why we have seen quite a few repossessions. People are simply saying to themselves there is no way out, other than to hand the keys back to the lender. This in itself does not solve the problem, hence the increasing number of bankruptcies.”

Mr Sives advised anyone who wants a guide to the current valuation of their property to visit www.lpsni.gov.uk which is the website of the Government’s Land and Property Services. The agency assesses capital valuation for the purposes of calculating rates. “These were calculated at January, 2005 which is roughly where we are in terms of pricing of property now,” Mr Sives explained.

In the past week the University of Ulster Quarterly House Price Index (for July-September) suggested the overall average sale price across all property types in East Antrim is now £125,491 - a slight increase of 0.4 per cent on the previous quarter, but an 11.1 per cent decline over the year.

The average sale price of semi-detached houses (£129,837) rose over the quarter and the year by 0.4 per cent and 4.7 per cent respectively. The average sale price of detached houses rose by 0.4 per cent over the quarter but was substantially lower over the year. The average £74,693 sale price for terraced/townhouses is down over the quarter and the year.

“Northern Ireland’s housing market is showing some signs of improvement, albeit constrained, with the number of sales up and the rate of price decline slowing,” said the authors of the index.

The number of transactions was 1,133 compared to 1,062 in the previous quarter. The Northern Ireland weighted rate of annual decline slowed to 7.5 per cent from 15.3 per cent recorded in the second quarter of this year.

“The housing market is continuing to demonstrate volatility and although activity levels have improved the market is still in a state of correction from what was arguably the deepest downturn ever experienced in Northern Ireland,” the report stated.