The firm, which currently services a £43bn mortgage book on behalf of other lenders, said 827,321 homeowners (7.3% of all households with a mortgage) have a debt that is higher than the value of their property.
If house prices fall by 10% HML claims that number will double to 1,673,707 (14.8%), which is close to the record 1.8m negative equity cases seen in the house price crash of the early 1990s.
HML’s analysis also shows that nearly a third of all borrowers in Northern Ireland (93,134 or 30.4%) could be trapped by negative equity while the North West of England will be the region with the highest number of homeowners with loans larger than the value of their property (213,674).
The firm also said if house prices fall by 10%, nearly one in four borrowers (23.8%) with negative equity will be under the age of 30 and a further 23% will be aged between 30 and 40.
HML’s chief finance officer Neil Warman said: “This analysis show just how vulnerable UK households are to a continuing fall in house prices.
“Since their peak before the onset of the credit crunch, house prices have fallen by nearly 18% and, although there’s considerable variation in future forecasts, a number of analysts are saying we need to brace ourselves for further falls.
“HML’s data shows that even if house prices dip by just 2.5%, more than 1m UK households will have a mortgage debt that is larger than the value of their home.
“For many regions, negative equity could hinder the free movement of labour, especially among younger borrowers, which will inevitably contribute towards a delayed economic recovery.”
