Negative Equity Predicted for 2.5 Million Home Owners

The Nationwide (BBC News) predicts that 2.5 million homeowners could be pushed into negative equity, due to a 25% fall in house prices. Indeed, there may be no recovery in the housing market until 2010.

The US Treasury’s bailout of housing finance providers, Fannie Mae and Freddie Mac, should go at least some way in helping to restore confidence in financial markets.

In the UK, two options being considered by the Treasury are to provide a guarantee for mortgages packaged as bonds for sale to investors, or to extend an existing Bank of England liquidity scheme so that it could help banks to refinance new mortgages. Both options are designed to boost the confidence of global investors that the money they lend to UK banks for the provision of mortgages would be safe.