Five million 'face negative equity'

Negative equity is poised to strike another 1.2 million UK homeowners by the end of the year, according to research group GfK NOP.

The numbers will add to the estimated 3.8 million people who already owe more than their home is worth as property prices continue to plunge.

The situation is worse for the 14% of people who also have at least three other forms of debt on which they are repaying only the minimum monthly amount.

Single people aged between 25 and 34, young couples and younger families are most likely to find themselves in negative equity, as these groups are likely to have taken out mortgages with high loan to value ratios near the peak of the housing market.

The group said anyone who took out a mortgage and around half of those who have remortgaged since 2005 were likely to either already be in negative equity, or be very close to it.

It also warned that the retirement plans of an estimated 7.2 million who were planning to use their home as part of their pension, were likely to be hit by falling house prices.

The research, which was based on responses from 60,000 people, also found that only one in 10 potential first-time buyers had a deposit of at least 10% that is currently needed to get on to the property ladder.

It said only 12% of people aged under 40 who did not currently own their own home had £16,000 or more in savings - 10% of the average property price of £160,000.

At the same time only one in 10 of these people would consider taking out a mortgage during 2009.