House prices will fall by 15% in the next two years, pushing one in ten homeowners into negative equity, a leading investment bank has forecast. The Times
Morgan Stanley predicts that 1.2 million people will be in negative equity, owing more money on their mortgage than their home is worth — levels not seen since the early 1990s.
Those affected cannot move house easily unless they raise finance elsewhere to pay off their home loan. They must either stay put and pay their mortgage bills, or sell at a loss.
First-time owners will be particularly badly affected. Five per cent took out a loan of 100 per cent or more of the purchase price of a property last year. Morgan Stanley also suggests that if house prices fall by 25% over the next two years, more than two million — or a quarter of all borrowers — would be in negative equity.