CML claims 900,000 in negative equity

The Council of Mortgage Lenders (CML) has suggested around 900,000 home-owners are currently in negative equity, though it highlighted the majority - around two-thirds - face only modest shortfalls of less than 10%.

The trade body noted that the perception of a causal link between negative equity and mortgage repayment problems was a myth, stating that negative equity only becomes a problem if households need to move, or are already experiencing repayment difficulties.

Bob Pannell, head of research at CML, commented: "Negative equity will contribute to subdued property turnover, but otherwise should have few adverse effects for the majority of households affected. Where people needs 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.

"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 1990s, as low interest rates on their mortgage can help them to save or overpay more quickly."

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