In a recent survey it was found that many people in the UK desire to own a home in some quiet countryside.
In the opinion of all those with such a dream, a countryside home brings the most happiness.
But the trouble for anyone hoping to translate the dream into reality is that the current economic downturn has done sufficient damage to the housing market that house prices have plummeted to decreased levels.
Now most homes are in negative equity and moving home is simply out of the question.
Negative equity
Mortgage equity is a situation in which a lender offers a borrower (homeowner) a favourable interest rate in exchange for a portion of the profit that comes from the sale of the borrower's home. Thus, the profit depends on the value of the home itself. And under a climate of the recession plunging home value means less profit or insufficient equity.
The implication of this is that lenders become unwilling to lend to a homeowner whose home has insufficient or negative equity.
Up to 3.5 million households are stuck in their old homes across the country due to the problem of negative or insufficient equity. The issue is further compounded by the mortgage drought that characterised the entire market since the credit crunch began early last year.
Explaining the gravity of the situation in a report, a leading insurance broker revealed that about 2 million homeowners have homes with negative equity or with equity of less than 10 per cent, just as half a million are with equity of between 10 per cent and 15 per cent. And a further 1 million are either with sub-prime or self-certified mortgages.
Deposit
Despite reports of increasing mortgage approvals it has been observed that most lenders still require large deposits especially from first-time buyers.
Most of them are being quite cautious not to lend to borrowers without a security and or clean credit record. Payment default has been quite an issue and lenders would prefer to avoid borrowers that would end up defaulting. Anything less than sufficient equity will not be of help to anyone looking to borrow in order to purchase a new home.
"Most people rely on the equity in their property to provide the bulk of the deposit required for a new property," said spokesperson, Ray Boulger, at the website.
But what will become of those that are not able to meet this requirement? The expert added that it means they cannot move home and this could also have serious macroeconomic impacts.
Competitive market
In spite of the above problems the government still insists that there is a "very competitive market for mortgages".
Financial services secretary, Lord Myners, was reported to have argued in this respect even as the market is becoming increasingly difficult for borrowers with small deposits to penetrate.
In the meantime homeowners can device their own survival strategy while the recession continues. One way out, according to some analysts, is to downsize. This may seem absurd to those who want to remain at the same level with their neighbours and friends, but the wisdom in downsizing to a less expensive home or location is that one would save a few hundred pounds and avoid being trapped in a home with negative equity.
