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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Almost one million people could be in negative equity across the UK, according to a study by the Council of Mortgage Lenders.

It says at the depth of the last housing market recession in 1993, 1.5 million households or more were estimated to have negative equity, and that number is creeping back up with 900,000 homeowners now in a position where their mortgage is worth more than their home.

A new research article by James Tatch, senior statistician at the CML, suggests that of the 900,000 home-owners currently have some degree of negative equity, the majority of these – around two thirds – face only modest shortfalls of less than 10%. This equates to around £6,000 for those first-time buyers with negative equity, and £8,000 for other home-buyers.

The CML says that in the last downturn, most people sat tight, saved, continued to pay their mortgages and eventually recovered their equity position – exactly what most of today's borrowers with reduced or negative equity are also doing.

The mortgage lender group also urged people not too be too downhearted about the numbers – while reduced and negative equity are likely to constrain the ability of affected households to move house, even in today's weaker market, the CML estimates that home-owners still have around £2.1 trillion of unmortgaged housing equity.

Bob Pannell, CML head of research, says: "Although negative equity has resurfaced as house prices have fallen, one big difference from the early 1990s downturn is that it is less concentrated among young, first-time buyers, and more evenly spread across wider age groups and those at different points on the housing ladder.

"Negative equity will contribute to subdued property turnover, but otherwise should have few adverse effects for the majority of households affected. Where people needs to move house for job or other priority reasons, lenders can often be flexible to existing borrowers with low or negative equity, as long as their financial position is sound and they have a good payment track record.

"Otherwise, sitting tight and building up savings or overpaying on the mortgage are the strategies most borrowers are likely to adopt. It should be easier for households to rebuild their equity position than in the early 1990s, as low interest rates on their mortgage can help them to save or overpay more quickly."

SOURCE: CML, 16/04/09

To keep up with the latest news and comments on current financial affairs please visit the Secured Loan Blog.