Mortgage lenders now believe that 1 in 10 borrowers owe more on their mortgage than their house is worth. But the position does vary depending upon which area of the country you look at. For example, the East Midlands is particularly bad in cities like Northampton, Derby and Nottingham with up to 23.6% of borrowers facing negative equity.

Whilst we have seen growth in house prices over recent months, commentators are warning that the worst may not be behind us. We warned about this very point last month and we still believe that the green shoots of the housing recovery will die back. If housing prices do go into reverse again, the curse of negative equity could easily hit 1 in 3 borrowers.

This is very worrying, not just for those afflicted because many more of them will end up in default and subsequent repossession but also for the housing market at large.

Negative equity prevents people moving home because they cannot afford to buy another home if they sell. This means that the supply of homes to estate agents is restricted and, somewhat perversely, this tends to push prices up. Then as the supply of houses increases again, unless mortgage financing becomes easier, prices edge back again.

If you are in negative equity, don’t panic. Negative equity is only a problem if you have to move or remortgage. Your best bet is to ride out the storm – this may take time but for many it’s the only option.