Negative equity starts to hit British homeowners

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by Kay Murchie

Last week, the Nationwide building society’s latest monthly survey revealed that UK house prices fell 2.5% in May - the largest monthly fall for 17 years.

As a result of house prices tumbling at record speeds, analysts have confirmed that a number of British homeowners are slipping into negative equity with predictions of over one million households facing negative equity by the end of next year.

US investment bank Citigroup, said since house prices started to fall late last year, 250,000 Britons are in negative equity.

The US bank believes that property prices could decline by as much as 15% by the end of 2008. Such a drop would leave at least a million homeowners in negative equity.

Back in April, Liberal Democrat Treasury spokesperson Vince Cable, predicted that three million households could fall into negative equity over the next 12 months.

Mr Cable said some are already there and it is becoming increasingly clear that the downturn in the housing market is much more than just a blip.