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Thousands on the edge of the 'NE Abyss'

Jaimie Kanwar

Problems are growing for almost 150,000 homeowners who took out mortgages in early 2007.

According to a CACI survey for the Daily Telegraph, one in eight people who bought a property since early 2007 owe more than their home is worth, and are at risk of falling into the negative equity trap. 

The CACI analysis also suggests that 360,000 mortgage holders could be in negative equity by the end of 2008 if house prices fall by 20%.

The findings are similar to a recent BBC report (based on data from the Council of Mortgage Lenders) which revealed that more than 23,200 people who took out 100% mortgages in the year to 31 March could face negative equity.

And last week, the Nationwide said house prices fell for the eighth month in a row in June, with prices now 6.3% lower than a year ago. 

A spokesperson for CACI commented: "If a house loses its value it is not necessarily a problem unless the owner has to move, remortgage, or cannot afford to pay the mortgage.

"In a rising market banks will lend 100% as there is little risk of them not getting their money back. But as prices have been falling, lenders have been turning borrowers away if they do not have a deposit".