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Debt diaries: Chris Guy's story

By Catherine Burns
Newsbeat reporter

One day it's job losses, the next it's banks refusing to lend cash, and then even more grim headlines about the economy. For the last year, Newsbeat has been following some listeners with money worries to see how they can sort themselves out with debt counsellor Chris Tapp, from the charity Credit Action, giving his advice.

Chris Guy
Chris Guy's home has dropped in price from 153,000 to 120,000

When Newsbeat first spoke to Chris Guy in January 2008, his main worry was what would happen when his fixed rate mortgage deal finished.

He was worried that he'd struggle to pay more if interest rates went up.

He spent months waiting anxiously to see what would happen.

At first, interest rates did climb higher. But as the credit crunch kicked in, the Bank of England tried to kick-start the economy but dropping them further and further.

So by the time Chris's original mortgage deal ran out, rates were low, so he's not having to pay as much each month.

He says: "Now my monthly payments have gone down by about 250. With the mortgages coming down, there's a bit more cash in my pocket."

Negative equity

That might sound like a happy ending. But as interest rates have come down, so have house prices. And they're still dropping.

Chris bought his place a couple of years ago for 153,000. But now the value of his house has fallen to about 120,000. So he owes more on his mortgage than the house is actually worth.

For sale signs
Chris guy will need to stay in his house instead of selling it
"I feel a bit gutted really. It's a bit of a shock to find I'm about 33,000 down on what I paid for it," he says.

Debt counsellor Chris Tapp says there's no easy solution to the problem of negative equity.

He says: "There's not a huge amount Chris can do, particularly in the current market. But, over the course of a number of years, house prices are likely to go back up."

"So actually in five or 10 years, he's still likely to make a tidy profit."

Experts say negative equity is only a problem if you need to sell or re-mortgage. Otherwise, you just need to sit it out.

So Chris will have to be patient for years.

"This situation is a bit of a nightmare. It's nice to know things will go back up and recover. But it's difficult, thinking I've got to stay in the same place for the next five or 10 years.

"I've just got to grin and bear it, and do the best I can," he says.

Debt diaries: Andy's story
Monday, 26 January 2009, 09:33 GMT |  The P Word
Debt: Your questions answered
Thursday, 17 January 2008, 10:40 GMT |  Newsbeat
Can debt problems be solved?
Wednesday, 16 July 2008, 08:27 GMT |  The P Word
Jacqui Smith answers your questions
Thursday, 22 January 2009, 08:53 GMT |  The P Word
New plan to make loans easier
Monday, 19 January 2009, 14:28 GMT |  Newsbeat
Credit crunch hits homeowners
Thursday, 2 October 2008, 14:55 GMT |  The P Word

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