250,000 homeowners ‘are in negative equity’

Posted 2008-06-2

A financial expert has estimated that 250,000 homeowners are in negative equity and predicts that the figure will reach more than a million by the end of next year.

Citigroup adds that this would mean one in 12 homeowners with a mortgage would be affected.

The investment bank states that the problem can be attributed to declining house prices in the UK, which have fallen by seven per cent since autumn 2007, and are estimated to drop by some 15 per cent throughout this year.

Michael Saunders, UK chief economist for the organisation, said: "The signs are that the economys slowing very sharply but with inflation shifting up the Bank of England cannot cut rates."

He adds that the economy is currently reeling from two big shocks; the credit crunch and the housing crash.

Meanwhile, according to Bank of England data, mortgage approvals have fallen to a 15-year low, with just 58,000 being granted in April.

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