UP TO one in ten families could be plunged into negative equity if house prices fall by 15 per cent, an investment bank warned yesterday.
Economists at Morgan Stanley predict house-price falls of up to 10 per cent this year, followed by a further drop of 5 per cent in 2009.
In a report on the UK housing market, they warned that if these falls materialised, 10 per cent of mortg
ages would be for a higher sum than the value of the property they were taken out on, meaning homeowners would be in negative equity.
Morgan Stanley expects the housing market slowdown and credit crunch to also hit the mortgage market, predicting net lending of just £65 billion this year, down from £108 billion in 2007.
Earlier this week, The Scotsman revealed that Scotland will not escape the housing-market slump, with prices falling within six months according to the leading economist Professor David Bell.
His prediction came despite government figures which showed Scotland bucking the UK trend with growth of 9.7 per cent during February compared to a British average fall of 1.6 per cent – and annual growth slowing to its lowest level for 19 months.
A record 78.5 per cent of surveyors reported a drop in property values in March, overtaking figures set in the 1990s house-price crash.
Meanwhile a major investment bank hit by the credit crunch cast a shadow over the City yesterday after unveiling thousands of job cuts.
US giant Merrill Lynch, one of the main casualties of the subprime crisis, said it was axing 4,000 staff in a bid to save money. There were also reports of 900 London jobs being cut at Swiss bank UBS.
The full article contains 297 words and appears in The Scotsman newspaper.
