Homeowners in the UK have laid their hopes in an economic recovery to occur much faster than what is probably possible.  With so many homeowners already in negative equity it appears that there will likely be more to join the ranks of those that have mortgage debt above the level of their property value.  House prices are expected to decline further in the year and so as property values decline further so will equity for a large number of homeowners.

It was revealed last month in the Bank of England’s Inflation report by the Bank’s Governor Sir Mervyn King that inflation will remain above the 2 per cent target throughout 2012.  It had been forecasted to fall to the goal rate or even below in earlier forecasts.  The continued problems in the eurozone and the lack of economic growth is putting a strain on purchasing power of the consumer.

Without buyers in the housing market and with tighter lending practices expected then there is not likely to be a rebound to house prices in the near future.  Therefore homeowners should be aware of where their equity currently stands and where it is headed.  Homeowners should become very familiar with their current mortgage.  It is important to stay ahead of negative equity threats rather than to be surprised once it occurs.  It is always easier to prevent problems rather than come out of them and negative equity problems are a difficult thing to face financially for many homeowners.  It is also important to get a clear understanding of a current mortgage to determine if a remortgage would be helpful.  Since lending is tight it pays to be in the planning process for a remortgage long before it is time for one when a current mortgage term expires.