Housing market 'healthier than it was in 1990s'

Despite fears of a significant correction in property prices, problems in the mortgage sector and concerns over negative equity, the housing market is actually healthier than it was in the 1990s when many mortgage borrowers saw the value of their homes plummet.

This is the view of the Council of Mortgage Lenders (CML), which believes that while there is likely to be a "modest" increase in the number of homeowners falling behind on their mortgage repayments this year, the "vast majority" are in a "strong position".

Indeed, the organisation points out that while some homeowners will face negative equity the numbers will be small in comparison to the 1990s and the extent to which they will fall into negative equity will also be moderate.

"This is not a return to the early 1990s," the CML insists. "Fewer people have bought at the top of the market this time round, and earlier price rises have given the vast majority of mortgage holders a sizeable equity cushion in their homes."

Research from the Financial Times reveals that house prices fell by 0.6 per cent during May, their fastest rate since February 1995. It is feared that many homeowners, particularly those who took out 100 per cent mortgages, will see their properties go into negative equity as a result.

However the CML points out that as long as borrowers are able to keep paying off their mortgages, as the majority are likely to do, then they should not experience problems as in the long term house price growth and capital repayments will ensure they come back out of negative equity.