According to the Bank of England (BoE), more than one in ten households may have fallen into negative equity, which is similar to levels seen in the mid-1990s.

The central bank estimated in the first quarter of 2009 between 700,000 and 1.1 million homes were in negative equity, due to sharp house price falls and then a loss of confidence and spending power during the recession.

The BoE cautioned there was a great deal of uncertainty around its estimates of negative equity. It said: ‘Nevertheless, rising loan-to-value ratios during 2008, as indicated by higher estimates of the number of households in negative equity, are likely to have had economic consequences.’

If correct, the BoE figures suggest up to 11% of households were in negative equity in the first three months of the year. The BoE said: ‘The majority of mortgagors continued to hold significant buffers of housing equity with an estimate based on a household survey suggesting that over 75% of mortgagors had an LTV ratio of less than 75%. Estimates also indicate that the majority of those that had fallen into negative equity by 2009 Q1 had relatively small values of negative equity, though that would increase in the future if house prices fell further.’