Negative Equity basically means that the size of your mortgage AND any secured loans you may have is greater than the value of your house. The scourge of the 1990s is back in a big way and is set to engulf a whole new generation of home-owners. International investment bank Morgan Stanley has said that 1.2 million British homes could be in negative equity before the end of next year. Contrary to speculation and rumours, being in Negative Equity does not mean that you will automatically be threatened with repossession by your lender.

However, you are going to have issues ahead of you which could cause a lot of sleepless nights. When your current mortgage deal ends it will be impossible to switch to a competitive new product unless you have a large windfall of cash in order to reduce your outstanding debt. Consequently you will be stuck on your bank's Standard Variable Rate (SVR) which will be somewhere between 6.5% to 10% and above. For most people this will lead to much larger monthly payments. Also, because the rate is variable it could rise in the future as the government puts pressure on the Bank of England to control inflation.

This jump in monthly payments is referred to as "rate shock" and this is what you should be really worried about. If your mortgage was to go up by £500 a month, would that cause you problems? Don't take it lightly, higher mortgage payments lead to arrears and arrears lead to repossession. Already, there have been more repossession procedures started in 2008 than in any other year since 1992. It doesn't matter if you live in a slum or in the best neighbourhood in town - the bank don't care. Families are being moved out of their homes under force because they can't come to terms with the rate shock.

Can you imagine the shame? Can you imagine the embarassment of having to phone an estate agent to go back into a property which was once your family home? How would it feel to look your children in the eye when you are in the waiting room at the council emergency housing office?

Repossession is not the end of the matter however. What most people don't realise is that you still have responsibility for the property until it is sold. When the locks get changed - you are charged. Also, with today's market it is not guaranteed that the property will sell quickly. As the market shrinks the debt piles up and the likelihood of a repossessed owner getting on the ladder again shrinks and shrinks.

So what should you do as a homeowner with negative equity? Well the answer to that is really based on your own circumstances and independent advice should be sought. It is universally the case, however, that you can create equity more easily than you first realise. By channelling cash into the right funds, taking a long term view and paying yourself first, Negative Equity can quickly become a thing of the past.