"Negative equity threat spreading for homeowners"

From today's Telegraph:

An estimated 145,000 mortgage holders already owe more in mortgage payments than their houses are worth ... The research company CACI analysed the 1.2 million people who bought a home since the start of last year and calculated that one in eight are in negative equity. This figure could rise to as many as 360,000 by the end of this year if house prices fall by 20 per cent, as some economists fear is now possible.

Wot?

From The Telegraph, 10 June 2008

"A leading City bank has warned that a quarter of a million homeowners have slipped into negative equity since the start of 2008 ... Michael Saunders, head economist at Citigroup ... has warned that house prices could fall by 15 per cent or more by the end of 2009, taking the number of households in negative equity over the million mark, but now says the drop could be even greater."

From The Times, 12 June 2008:

"Falling house prices have left more than 30,300 homeowners in negative equity, says the Council of Mortgage Lenders. Morgan Stanley, the investment bank, believes that a further two million households are at risk of owing more than the value of their property if house prices fall 20 per cent by 2010."

So our starting figure - those in Nequity already - could be anywhere between 30,000 and 250,000.

CACI's Nequity-o-meter suggests for every 1% fall in house prices (i.e. every month, at the speed at which prices are falling) there'll be an additional 10,000 households in Nequity. But this only relates to the 1.2 million people who have bought in the last year-and-a-half. There are about 12 million outstanding mortgages and LTV's are fairly evenly distributed (between 'nearly paid off' and '100% mortgage') - so that means the real figure is 100,000 more in Nequity for each 1% fall.

Which ties in nicely with the Nequity-o-meters used by Citigroup and Morgan Stanley, which suggest that for every further 1% fall in prices (i.e. one month's worth of falls), there will be another 100,000 households in Nequity.

My magic fag packet says for every 1% fall in prices, it might be as many as 120,000, but let's go with 100,000 as a nice round figure.