Homeowners risk it all on their properties

Homeowners risk it all on their properties

Homeowners are guilty of taking large financial risks by piling all their funds into one asset - their houses - according to an academic study published today.

Researchers at Durham University said 65% of English mortgage holders place almost all their savings in their properties, seemingly forgetting the experiences of the housing crash in the 1980s.

During a two-year study - "Banking on Housing; Spending the Home" - researchers found that 59% of homeowners had no other form of investments apart from their properties and their pensions.

Less than a quarter of homeowners deliberately seek a balance between home ownership and a diversified portfolio.

Durham University's professor of geography, Susan Smith, said: "This study really draws attention to the precarious position of the majority of English homeowners' savings.

"While many would think it strange to invest everything they have into one particular company, to all intents and purposes more than seven million people in England are doing just this by ... investing almost everything they have in one building, in one neighbourhood, in one town, in one region, despite the hindsight of the recent housing market collapse."

House prices in the UK rose by more than 10% last year, but many commentators are predicting a slow down in the market in 2007. In the late 1980s, four years of price increases at levels of more than 19% a year were followed by four years of price falls,.....continued below

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although the total drop in prices came to around 10%.

Commenting on the study, David Elms, chief executive of IFA Promotion, which offers independent financial advice, said: "It is worrying that so many people have so little savings outside their family home.

"Everybody needs some savings to see them through a rainy day, such as illness or being out of work. The danger is, of course, that people will be tempted to borrow more to tide them over, exactly at the time when they shouldn't really be increasing their debt."

Guardian Unlimited © Guardian News and Media Limited 2006