UK Money News
2nd May 2008
1m facing negative equity by end of 2009, warns bank
Up to a million homeowners could be trapped in negative equity by the end of 2009, it has been claimed.
In a new report from City investment bank Citigroup, it is predicted that UK house prices will fall by 15 per cent in this timeframe, thus resulting in a surge in the number of people who owe more on their mortgage than their properties are worth.
The recent declines in house prices have already resulted in 250,000 households in this situation, the bank calculates.
Michael Saunders, chief economist at Citigroup, said: "The signs are that the economy's slowing very sharply, but with inflation shifting up the Bank of England cannot cut rates.
"The economy's being hit by these two big shocks: you've got the credit crunch and the housing crash; and you've got this shock from oil prices."
According to Nationwide's most recent house price study, the average price for a property slipped by 2.5 per cent in May - the biggest single monthly drop in the survey's 17-year history.
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