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Decline in negative equity to continue

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The number of people in negative equity fell dramatically in the last four years, with suggestions this trend could continue.

Figures from HML said in the last four years the levels of negative equity dropped 85.4%. Some 120,500 homeowners are now in negative equity, compared with almost 827,000 at the start of 2011.

This was under a coalition between the Conservatives and Liberal Democrats and with the former now in total control, policies for the housing market are expected to remain broadly similar.

Greater London saw the biggest fall in negative equity with virtually all properties showing strong price growth. In the capital, negative equity has dropped 99.8% in the last four years.

The South East, East of England and East Midlands also saw strong reductions in negative equity.

However, in Northern Ireland this trend was revered and negative equity grew by more than a quarter (27.4%). Today’s figures are below the Q1 2013 peak.

Damian Riley, director of business intelligence at HML, said: “With the Conservatives winning the UK general election, many in the residential property sector may see this as providing continued stability – and this could support a continued decline in negative equity.

“It is no surprise to see constituencies where house prices are increasing fastest voting overwhelmingly in favour of the Conservative Party.”

Riley said anyone who was struggling with negative equity should immediately contact their mortgage provider.

“However, while rising house prices may kill off the issue of negative equity for many, those who are still in this situation should consider making mortgage overpayments where possible, particularly before a mortgage interest rate increase. History shows that whoever is in government, interest rates will have to eventually rise,” he said.

“Our advice remains the same: any customers who cannot currently afford to pay their mortgage and are worried about slipping into arrears should talk to their lender at the earliest opportunity, to give them plenty of time to find a solution that works for both parties.”

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