UK house prices fell 0.9% on average in June, according to recent Nationwide figures. This information combines with data published in the Daily Telegraph recently showing that Close to 150,000 homeowners who took out mortgages since early 2007 may face negative equity. 

This means that one in eight of 1.2 million who bought a property since then owe more than their home is worth. 

If a house loses its value it is not necessarily a problem unless the owner has to move, remortgage, or cannot afford to pay the mortgage. 

The Telegraph analysis also suggests that 360,000 mortgage holders could be in negative equity by the end of 2008 if house prices fall by 20%. 

In a rising market banks are prepared to lend 100% mortgages as there is little risk of them not getting their money back. But as prices have been falling, the risks have increased and lenders have been turning borrowers away if they do not have a deposit.  

Nationwide said house prices fell for the eighth month in a row in June, with prices now 6.3% lower than a year ago. The average home now costs £172,415 and is £13,629 cheaper than at the top of the market in October last year.

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