Recently released figures have suggested that the fall in house prices has now resulted in over one million homeowners being plunged into negative equity.

In fact, it is estimated that the collapse in house prices in the UK has left around 1.2 million homeowners trapped in negative equity, where they actually owe more on their home than the actual value of the property.

Figures show that just a year earlier fewer than one hundred thousand homeowners were in negative equity, with house prices having boomed over the previous decade. However, for nearly a year and a half house prices have been plunging, and the number of people now in negative equity has rocketed. It is thought that one average those most likely to be in negative equity now are people that bought a property since 2003.

One economist warned that as house prices continue to fall around two hundred thousand homeowners a month are falling into negative equity. He warned that this figure could continue to increase, and that in total around three million homeowners could have fallen into negative equity before the house price crash comes to an end.

Another economist said that the falling house prices, amongst other factors, have resulted in people looking at properties but not actually buying them, which has also affected sales levels.

He said: ‘While the fall in house prices and the parallel reduction in interest rates has probably made many households curious about what is available in the market, many are likely to be hesitant to commit in a recessionary environment of rising unemployment and increasing uncertainty about future incomes.’

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