According to a recent report around 1.7 million people are facing the threat of negative equity if house prices continue falling at the same rate as they have been for the past few months. Officials from Standard and Poor have predicted that over the next year house prices could fall by a further 17%, and if this happens around 1.7 million homeowners could be left facing negative equity. Negative equity is where the homeowner owes more on the property by way of mortgage than the property is worth.

The figure that has been mentioned in the report equates to around 14% of homeowners, and many of those affected will include people that bought properties recently when prices were still high and those that took out 100% mortgages and have therefore made little impact on their mortgage as yet. Many officials have predicted that house prices could continue to fall even beyond next year, and this means that the situation could continue getting worse for many homeowners.

Officials have said that already there are around 70,000 people in negative equity, and this equates to around 0.6% of homeowners. However, the figure could head towards the two million mark if house prices keep on falling.

One official from Standard and Poor stated: “The downward trend in UK house prices now seems well established, and we expect prices to continue falling in the near term.”

Buy to let borrowers and those that borrowers from sub-prime lenders may also be at increased risk of negative equity according to industry officials. Also, some people have predicted that by 2010 house prices could fall by 20% or more, and this could leave over two million people in negative equity.

Recent Additions:

• Some Londoners could find it more difficult to sell their homes
• Further rate cuts may be put on hold for this year
• Fall in number of mortgage approvals for homebuyers
• Just how bad is the UK economy?
• Buy to let mortgage demand is falling

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