Following further house prices falls for the month of February, as reported by a number of major lenders and the Land Registry, it has been reported that a rising number of homeowners are now facing the daunting prospect of negative equity.

This is where the value of the property falls below the amount of money that is owed on the home, and with house prices having plunged over the past twelve months many of those that purchased homes over the past few years have found themselves sliding into this situation.

According to research that was carried out by GfK NOP, the research group, there are now nearly four million homeowners in the UK that are facing or already in negative equity.

Officials have said that this is one of the bleakest reports in relation to the property price slump and the effects of the financial crisis. The report was released following the study, which involved surveying sixty thousand homeowners in the UK. The most affected by the situation are younger homeowners who took out mortgages around the time that the property market in the UK peaked.

One official from the research firm said: “The shift to negative equity has the potential to be a mammoth welfare disaster for the nation. The reality is that if there are further job cuts, the problem will become significantly worse.”

However, the Royal Institute of Chartered Surveyors described the figures as a little extreme, stating that most of those falling into negative equity would not be selling up and so that effects would be more psychological rather than affecting them in real terms.

Speaking of the GfK report, RICS stated: “It has highlighted an important point that negative equity has returned and is getting worse. But when you make an assessment of negative equity, you have to make significant assumptions. There is a danger of people becoming obsessed with negative equity when they are not planning to move.”

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