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Almost a quarter of UK mortgage holders could be at risk of negative equity

Fair Investment has found that that although the average mortgage LTV borrowed by property owners is 64%, 3% of mortgage holders had borrowed 125% LTV, 5% had borrowed between 101 and 125%, and 13% had borrowed 91 to 100% of the property's value.

This means that 21% of mortgage holders borrowed more than 90% of their property's value, which could give them an increased risk of negative equity, particularly if property prices continue to fall.

The Financial Services Authority has predicted that if house prices fall by 30% from the level they were at the end of 2007, more than two million British homeowners will be in negative equity. This is more of a risk for those who borrowed 90% of the property's value or more, as according to some market analysts, house prices have already fallen by more than 15% in the last 12 months alone.

On a positive note, 19% of mortgage holders borrowed just 20% of the property's value or less, meaning they owned 80% of their home when they bought it. A further 16% borrowed between 81 and 90% of their home's value, while another 15% borrowed between 71 and 80%. In total, 10% of Brits questioned had borrowed between 61 and 70%.

'Our statistics show that, although the days of high LTVs are now in the past, there are a number of mortgage holders out there who did borrow more than 90% of their home's value,' said Sharon Bratley, chartered financial planner at Fair Investment.

'However, unless they are planning to sell up, negative equity is unlikely to affect homeowners who can hang on until the market recovers. Nevertheless, negative equity can be concerning, so, as interest rates fall, taking mortgage rates with them, it could be advisable to those with a high mortgage LTV ratio to increase their mortgage payments, and therefore the equity they hold in their property, depending on their circumstances,' she added.

Bratley concluded that because interest rates are particularly volatile at the moment, it is always worth shopping around to make sure you are getting the best available deal on your mortgage, whatever LTV ratio you have.