Negative Equity to be faced by significant number

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Standard & Poor’s Ratings Services has warned it expects a further drop of 17% in UK house prices before prices flatten off in 2009, which would see a “significant number” of mortgage borrowers falling into negative equity.

Research by the firm’s economists found that while just 70,000 UK borrowers are currently in negative equity, this would jump to 1.7 million if its predictions prove correct.

Buy-to-let and non-conforming borrowers were identified as the most at risk on this assumption.

The firm stated: “The current run of house price declines raises the prospect of negative equity for a large number of homeowners, a situation not seen since the 1990's house price recession.”