I understand what you are saying but as I said in
this post, you have to redeem your mortgage to gain a new one. If the sale price falls below the mortgage value, then you are caught with negative equity which needs to be realised otherwise the bank will be lending more than 100% on the new mortgage. During the 90s, banks allowed this as an "unsecured" loan which had a higher rate to get the market moving again.
so let's take that £100k mortgage on a flat that now worth only £88k. You sell it for the £88k but owe the bank £12k. You buy a house worth 200k but the the £12k deficit from the flat needs to be added.. meaning you have a Mortgage value is 212k. the £12k is unsecured.
Thats all well and fine, but honestly, you have to be just dumb to take out sucha massive mortgage, a much more realistic situation would be, 15k upfront, 85K deposit, he's been there for 3 years, maybe he's paid off £8k a year after interest, you're now in a 88k house, with a 60k mortgage, not a problem.
Negative equity is very very rarely a real issue, most people just get upset that what they have is worth less than what they paid, and they only get upset when its a house.
If you buy a 100k flat with a 100k mortgate with an interest rate you can't keep up with and you can't move houses because you can't afford to pay off the mortgage, frankly, you deserve the lack of forward thinking about the possibilities.
Even IF thats what happened to the OP, he could simply stay in the same flat for an extra 2-3 years to the point he's paid off enough of the mortgage for it not to be an issue.
THe biggest issue IMHO is, for say the OP, he looked at houses and flats I'm sure 3 years ago when he bought, he looked at what was available then and decided he could afford a 100k place, but not a 200k place. He's got the idea of a 200k price bracket in his head as his next move up, so now he's looking, the markets depreciated, but he's still thinking he should be looking to move to a 200k place. While in relatity, all those 200k places he saw 3 years ago, are actually now 178K now, and are comparitively cheaper than his 100k was 3 years ago.
The fact is, all you can tell from the OP is, the value of his place has gone down and he wanted to move somewhere bigger, he's thinking negatively and not looking at the reality which is that its cheaper for him to move to a bigger place, than when his flat was worth a little more money. Its better for him to move to a bigger place now and end up with a smaller mortgage, smaller initial price, smaller interest payments and overall he could save 10k's buying now rather than waiting for the value of his flat to increase.
