One in Ten UK home to fall into negative equity |
Analysts at Morgan Stanley, the US investment bank, predict that house prices will fall by 10 per cent this year and 5 per cent next year, forcing 1.2 million borrowers into negative equity, which means a person's home is worth less than their mortgage.
The banks also suggesting that if house prices fell by 25 per cent over the next two years, more than 2 million — or a quarter of all borrowers — would be affected.
Morgan Stanley's analysts said: "Our base case is for a 15 per cent fall in nominal prices over two years... our bear case looks for a 25 per cent decline over two years."
However, the bank warned that its calculations on how many people would face negative equity could actually be too low.
"Note that these figures will ultimately understate the magnitude of negative equity as we have excluded lending in 2008, and excludes future lending," it said.
Recent Government figures showed that property prices fell by 1.6 per cent in February. The annual rate of house price growth slowed to 6.7 per cent, the lowest rate in 19 months, down from 8 per cent in January, figures from the Department of Communities and Local Government showed.
A record number of surveyors have also reported house price falls. Nearly 79 per cent more surveyors said prices fell rather than increased in March — the highest proportion since the Royal Institution of Chartered Surveyors started its poll in 1978.
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Added on 17/04/2008 21:16:33
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