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Homebuyers racing to beat stamp duty holiday 'should beware of negative equity'

HOMEBUYERS racing to beat the stamp duty holiday should beware of falling into negative equity, experts warn.

Property prices have soared with 95 per cent mortgages on offer.

But values could fall when the tax break ends this month.

Two in three first-time buyers now fear they could end up owing more than their home is worth and be unable to move, First Mortgage found.

Expert David McGrail of First Mortgage warned: "While the stamp duty holiday which finishes at the end of June has offered potential for a great saving, the current high demand for purchase means that prices are rising above the savings which can be made.

“At the same time, many first-time buyers would have been relying on high loan-to-value mortgages to secure their first property and just a small drop in house prices could leave them at risk of negative equity.

“While being in negative equity does not cause immediate issues, it does mean that homeowners will have difficulty re-mortgaging in the future, meaning they may lose access to the very best rates on the market.

"Negative equity is often looked at as this scary thing, but there are various things you can do to help the situation, both if you find yourself in negative equity and before you buy your property.

"When purchasing a property, you need to do your utmost to establish whether or not the property represents value for money.

"Paying over the odds is the most likely cause of finding yourself in a negative equity situation.

"If you find yourself in negative equity, it is important to speak to a broker to understand your best way out of the situation, which ordinarily would be a plan to overpay your mortgage on a monthly basis to bring the outstanding mortgage balance beneath the value."

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