A report released by the Council of Mortgage Lenders on Thursday said around 900,000 home-owners in the UK presently have some degree of negative equity, although the majority of these, about two thirds face only modest shortfalls of less than 10%.

Falling house prices raised the prospects of negative equity for borrowers. Negative equity is likely to constrain the ability of the affected households to move house, but it would not affect the ability to keep up mortgage payments or create a risk of repossession.

Bob Pannell, CML head of research said, Although negative equity has resurfaced as house prices have fallen, one big difference from the early 1990s downturn is that it is less concentrated among young, first-time buyers, and more evenly spread across wider age groups and those at different points on the housing ladder.

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