Brits still have a substantial equity cushion

The average loan-to-value ratio on mortgaged property in the UK is less than 60 per cent, those seeking cheap mortgages have been told.

Research by the Council of Mortgage Lenders CML revealed that despite the recent dip in house prices, most homeowners still have a considerable chunk of equity in their homes.

Close to half of existing borrowers have outstanding mortgage debts which equate to less than 70 per cent of the value of their home, while a quarter have equity of between 10 per cent and 30 per cent.

"There is no direct relationship between negative equity and mortgage payment problems. What typically causes difficulty for households is not a nominal fall in housing value but an unexpected change in personal circumstances," said CML director general Paul Smee.

It comes as Nationwide reduces the mortgage rates on selected two and three-year fixed products to less than three per cent.

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2011-08-09 17:09:01 © Moneyextra.com