A couple of weeks ago the Council of Mortgage Lender released worrying figures with regards to negative equity levels amongst homeowners in the UK, claiming that 900,000 homeowners had been plunged into negative equity as a result of falling house prices.

This has put nearly 5 percent of homeowners in Britain into negative equity, where the value of their home has fallen lower than the amount of money that they owe on the property.

However, the CML said that collectively Britain’s homeowners were still sitting on over £2 trillion of unmortgaged equity.

One official from the CML said: “At the depth of the last housing market recession in 1993, 1.5 million households or more were estimated to have negative equity. Most sat tight, saved, continued to pay their mortgages and eventually recovered their equity position. This is what most of today’s borrowers with reduced or negative equity are also doing.”

Asnother official from the CML said that the effects may not be as bad as in the 1990s, as the negative equity was more evenly spread against a wider range of homeowners rather than concentrated amongst first time buyes like previously.

He said: “Where people need to move house for job or other priority reasons, lenders can often be flexible to existing borrowers with low or negative equity, as long as their financial position is sound and they have a good payment track record.”

He added: “Otherwise, sitting tight and building up savings or overpaying on the mortgage are the strategies most borrowers are likely to adopt. It should be easier for households to rebuild their equity position than in the early 90s, as low interest rates on their mortgage can help them to save or overpay more quickly.”

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