houses worth less than loans on them

MORE than 35 per cent of homebuyers who purchased the properties after 2008 are facing the prospect of being in negative equity.

And analysts warn that those homeowners with negative equity - their house being worth less than they owe on it - are likely to stay in that scenario for up to six years as property values remain "soggy" for some time to come.

The damaging JP Morgan report, released yesterday, comes as the Reserve Bank released the monthly minutes from its October meeting, which points to further rate cuts on Melbourne Cup Day.

The report shows large numbers of aspiring buyers are being locked out of the market as banks lift their lending requirements post-GFC. The level of new monthly mortgages being written has dropped from about 60,000 pre-GFC to about 45,000 this year.

Digital Finance Analytics principal Martin North warned house prices are likely to remain weak for years to come and may even fall as they are still at historically high levels compared to the average income.

The report defines negative equity as any house that has seen its value grow by less than 10 per cent - below inflation - in the past four years.

Queensland is the worst hit state, with 54 per cent of properties purchased since 2008 in negative equity. NSW is least affected with just 24.5 per cent of homes affected.

Since 2008 the national average home price has risen almost 10 per cent from $375,000 to $412,000, according to RP Data.

But in the same period the national level of negative equity jumped almost six-fold, from about 6 per cent of homes bought before 2008 to a whopping 35.6 per cent of homes acquired in the past four years.

JP Morgan banking analyst Scott Manning said despite the Reserve lowering interest rates to their lowest level in three years borrowers are finding it harder to get funds.

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