A million homeowners could be in negative equity by end of 2009

02 2008
A leading city bank has today warned that more than a million homeowners could slip into negative equity by the end of next year.

Citigroup has responded to the latest deluge of depressing figures for the housing market by suggesting that prices may tumble by 15 per cent as 2009 draws to a close.

With reports circling that as many as 250,000 homeowners are already finding their property worth less than the value of their mortgage, the bank has expressed its concerns for the future.

Chief UK economist Michael Saunders told the Daily Telegraph: "The signs are that the economy's slowing very sharply, but with inflation shifting up the Bank of England cannot cut rates.

"The economy's being hit by these two big shocks: you've got the credit crunch and the housing crash; and you've got this shock from oil prices."

The Bank of England's monetary policy committee is meeting on Thursday, when it is widely expected to keep interest rates at five per cent.

And with rising consumer costs such as food, fuel and energy pushing inflation higher, further rate cuts seem unlikely this year, heaping more pressure on homeowners.

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