Although the Council of Mortgage Lenders revealed that more than one million people could be in negative equity, the message is clear – don't fear negative equity.

The news and the media might be predicting the apocalypse as a result of the worrying statistics, but there is nothing to fear if you are in negative equity. It simply means you will probably do well to stay where you are, save hard and keep on top of your debts – because when the housing market picks up you might find that you are out of negative equity very quickly.

It's a common myth that negative equity leads to repossession, which simply is not true. Many people who are in negative equity may have a very low mortgage rate right now, meaning they are comfortably paying their loan each month. This means the lender is happy, your credit score improves and you are in a good position to be able to access a good mortgage when things improve.

But negative equity doesn't mean you should be complacent – while you are waiting for the market to improve, you should do all you can to make the most of your money. That means overpaying on your mortgage if you can (which fights negative equity), it means doing all you can to reduce your other debts and it means building up a nest egg for when times get better.

Negative equity is a fact in this downturn, but it is not something that should keep you up at night. House prices will improve and mortgages will become more accessible – it's just a matter of biding your time, taking good advice and putting together a plan of careful spending.

SOURCE: CML, 16/04/09

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