Negative equity is back with a vengeance as property prices plummet, finds a new study by consultants Oliver Wyman.
The number of Spanish homes that are worth less than their mortgages has more than doubled in the last 2 years to at least 250,000, finds a new study.
Anyone who bought in 2007 or later with a LTV of 80pc is now likely to be in negative equity, as property prises have slumped 20pc or more since the 2007 peak.
2 years ago, as Spain’s property boom turned to bust, the number of underwater mortgages was already at 100,000. Since then, house prices have done nothing but fall, forcing another 150,000 Spanish home owners into negative equity.
In Spain, unlike the USA, borrowers in negative equity cannot simply hand over the keys to the bank and walk away from their debts. Lenders can pursue borrowers for as long as it takes to get repaid in full, and can add on penalty charges for late payment that significantly increase the cost of the loan.
And foreign borrowers cannot expect favourable treatment: In theory, Spanish lenders can go after the UK assets of British borrowers in default through British courts.
