The Council of Mortgage Lenders (CML) said the figures, for the first quarter of 2011, suggest the problem is not as great as in the early 1990s. Then, an estimated 1.6 million households were in negative equity. The CML said while it made it hard for some people to move home, it did not mean their home would be repossessed.

"Negative equity is much less common than in the 1990s, and in the current cycle low interest rates and a relatively stable employment market are providing more options for borrowers and lenders in difficulty," the CML's director general, Paul Smee, said.

"What typically causes difficulty for households is not a nominal fall in housing value but an unexpected change in personal circumstances, like the loss of a job or the breakdown of a family relationship," he explained. First-time buyers The CML's research shows that fewer than 8% of all mortgage holders are in negative

Read more on this story: BBC News - Negative equity affects 827,000 households, lenders say