Buy to let landlords who are concerned about their investments losing value could fall behind on mortgage payments or be forced to sell at a loss as lending dries up said the Bank of England’s Financial Stability report recently.

The report comes shortly after a government study recommended that landlords should be offered easier mortgage facilities and tax breaks.

The twice yearly Financial Stability report predicted that during the global economic downturn about 1.2 million households could fall into negative equity if the housing slump continues. House prices are forecasted to fall further and a 15 percent drop in property prices from their peak in October last year would leave one in 10 homeowners with outstanding mortgage debt worth more than the value of their home.

The Financial Stability report found that house prices are now falling faster in Britain than in the United States, and could soon match the total nominal fall seen during the last recession at the beginning of the 1990s.

The Bank of England’s report has been mirrored by other figures provided by the Financial Services Authority (FSA) and The Land Registry.

THE FAS said the number of home repossessions in the second quarter rose to 11,054 from 9,172 in the previous three months and The Land Registry said house prices in England and Wales fell by eight percent on the year in September to their lowest level in two years.

One mortgage lender who appears to be bucking the trend is Abbey which with the support of its Spanish owner has generated new mortgage business in a shrinking market.

Abbey, bought by Santander in 2004, released news that it had recently attracted £1.4 billion in deposits.