As house prices continued to fall by a further one per cent in January 2009, research by Fairinvestment.co.uk has found that 25 per cent of the UK's mortgage holders are genuinely concerned about negative equity.
Of the quarter of homeowners who are concerned about negative equity, 11 per cent said that they had bought their home at the height of the property boom, which is why that as prices fall they are becoming increasingly concerned over the value of their home.
A further eight per cent of those with negative equity worries are on an interest only mortgage and were hoping that their property would be worth more than they borrowed.
When it comes to property as an investment, three per cent of those with concerns over depreciation were intending to use their home's value as a pension, while a further three per cent were hoping to use equity release from their property to fund retirement.
Commenting on the findings, chartered financial planner at Fairinvestment.co.uk, Sharon Bratley said: "Our results show that as house prices continue to fall, a large number of mortgage holders are becoming worried about their position.
"This is on top of the fact that mortgage rates are slow to fall and repossessions are on the up. The Government has tried to relieve this added stress for homeowners, but it is clear that more needs to be done before house prices fall further and push more people to worry about negative equity.
"However, for those considering equity release to supplement their retirement, negative equity is unlikely to be a real issue in practical terms as most people considering this option are likely to be mortgage free. What it will mean, however, is that the reducing value of the property consequently leads to a reduced amount that can be borrowed."
Twenty seven per cent of people questioned in the survey said that as long as they can pay the mortgage they are not concerned about negative equity, and, as the FSA recently reported a 92 per cent increase in repossessions, it would seem homeowners are right to focus on paying the mortgage.
In addition, 29 per cent of homeowners said that because they bought their homes before the property boom, they are not worried, while 16 per cent remain unconcerned as they believe that house prices will stabilise again.
Commenting on the fact that negative equity is just another concern among other recession related problems, Mrs Bratley added: "The prevailing economic conditions also mean that many people are getting next to nothing on their savings and investments and with potential job losses meaning that further debt, or at least the prospect of it, is looming in the background, negative equity is just one more issue for people to worry about.
"At times like this, it's never been more important to make sure that you are getting the best deals on your savings. And if you are struggling with debt problems, or are concerned that debt could soon become an issue, professional debt advice should be sought before it's too late."
