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Negative equity threat to 1.2 million in UK

The Bank of England has revealed that 1.2 million home owners in the UK will be at serious risk of moving into negative equity before the ongoing credit crunch is at an end. While this figure is even higher than the most pessimistic of reports over the last few months it could get even worse before we start to see any improvement.

Those who are unlucky enough to fall into negative equity will either need to downgrade their homes else wait for a recovery which could be many years arriving (indeed the latest report today claims that the UK property market will not recover until 2013). The more people that remain in their current homes the less activity there will be in the general housing sector and the less short to medium term growth.

As we have covered on numerous occasions the UK is one of many countries which depend upon the local property market for economic growth, therefore no growth in the property market will hold the economy back to a certain extent. Many people who had experienced negative equity in the 1980s were certain that they had seen the last of this uncomfortable spectacle but it is back with a vengeance.

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