A spectre from the 1990s is returning to haunt the streets of Britain—negative equity and the threat of home repossession. Only this time things could be much worse. The new Lloyds Banking Group, formed from Lloyds TSB’s rescue of HBOS last year, has said that over 543,000 customers owed more on their mortgages than the value of their homes.
The number of homeowners who are at least three months behind with their mortgage payments has risen by 40 percent since the end of 2007. More people will fall behind as house prices continue to drop. The Council of Mortgage Lenders predicts the number of repossessions will top 75,000 by the end of the year, close to the record year of 1991.
Many banks with large numbers of lenders in negative equity, including Lloyds and Northern Rock, are at least part-owned by the state. Rather than letting millions live in fear, the government should step in to ensure that no homes are repossessed and no one is thrown onto the street.