Charles Bean is the Bank of England’s Chief Economist, he gave an under-reported speech last week that shook up the Gilts market. It should shake up everyone. According to Mr Bean the Bank’s research has found that 5% of mortgagors have less than 20% equity in their home. That is equivalent to 1,350,000 homeowners.

Along with many other reputable forecasters Professor David Miles, chief UK economist at blue chip investment banking powerhouse Morgan Stanley, is predicting that by the end of 2009 house prices will have dropped 20%.

In pockets of London prices have already fallen 20% from their highs. If that trend goes nationwide Britain is looking likely to have more than million homes in negative equity before the next election. This is based on the Bank of England’s own somewhat conservative numbers…