OXFORD house owners are trapped with a negative equity of over £11,000 on average, according to a new report.

Global rating agency Fitch Ratings has estimated the average house in Oxford is worth £11,276 less than its owner’s debt, with homeowners unable to get out of negative equity by overpaying their mortgages because of salary freezes, overtime bans, soaring household bills and job losses.

But Oxfordshire property expert Stewart Lilley, past president of the National Association of Estate Agents, threw doubt on the value of the Fitch research, which said 15 per cent of prime UK mortgages already exceeded the value of the owner's home.

However, he agreed with Fitch that house prices would not recover significantly until 2010.

And he echoed the report in blaming “consistent criteria creep over several years” – meaning loan-to-value (LTV) limits on mortgages were allowed to rise steadily as house prices soared in the boom.

Mr Lilley said: “I think there certainly is some negative equity, because prices 18 months ago were extremely high.

“Despite what we as professionals were saying, the banks continued to lend money faster than they could print it.

“Then the inevitable happened, as we all now know. Money was freely available, with mortgages of up to six times your annual income. It really was ill-advised, but lenders were incentivised to sell.”

He added: “My view is that we are nearly there now, but I don’t think there is going to be any significant recovery until next year.”

Wayne Keenan, of Oxford estate agents Andrews, felt the situation had improved since Fitch’s research.

He said: “There is certainly evidence of negative equity, but it’s not prevalent. Last year a number of people couldn’t move because their mortgages were higher than the value of their house, but prices have picked up since then.”

He added: “Negative equity only affects people who have bought in the past two or three years.

“Anyone who bought before 2004 will still have equity in their home. It’s a really limited part of the market, and it’s changed in the last few months.”

The worst-case scenario from Fitch assumes a further 14 per cent decline in house prices from now, but Mr Lilley felt that was unlikely.

Andrew Montlake, of mortgage broker Coreco warned people not to panic. He said: “Negative equity is only an immediate problem if you have to move or remortgage.”

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