First-time buyers face negative equity crisis

TENS of thousands of first-time buyers who were helped on to the property ladder by the stamp duty holiday now face a negative equity crisis as house price look set to fall.

More than 89,000 homeowners who bought in 2020 and 2021 with small deposits are at risk of not being able to afford to remortgage when their fixedrate deals end over the next two years. Double-digit house price falls threaten to reduce the price of their property to less than the value of their mortgage, forcing owners into negative equity.

Property experts have warned of a “massive risk” that younger homeowners could find themselves trapped on higher interest rates.

Many of those at risk bought homes using the stamp duty holiday that ran from July 2020 to September 2021. Next year an estimated 55,634 homeowners who bought with deposits of 10 per cent or less will come to the end of two-year fixed-rate mortgages, according to analysis by Capital Economics, commissioned by The Daily Telegraph.

Aaron Strutt, of Trinity Financial, said: “If you’re in negative equity it is [impossible] to switch lenders unless you pay off more of your mortgage.”