The recent housing-market slump in Britain has pushed about one in ten homeowners in negative equity during the first quarter of the year, which is the highest proportion for 15 years.

According to the U. K. central bank's quarterly bulletin published in London, 1.1 million households now face negative equity.

A telephone survey conducted in September showed 7 percent of households, or 700,000 households, were facing negative equity.

In the foreword to the report Spencer Dale, Bank of England Chief Economist, said, "In addition to the considerable financial and personal difficulties that may arise for households faced with this situation, the extent of negative equity can have wider economic and financial consequences."

Housing sector prices have fallen sharply following increases in borrowing costs during the credit crunch and then a loss of confidence and spending power during the recession.

The problem of negative equity may add to Prime Minister Gordon Brown's worries after he fought off an upheaval within his Labour Party last week. To make the things worst, rising unemployment reduced the demand for loans. Lenders approved only 43,000 loans in April, compared to 113,000 in July 2007.

Markets director Paul Fisher, Bank of England, said that if banks remain unable to lend adequate funds then Britain's escape from the recession may be diluted. As per report, the bank said that as of May 21, its gilt holdings reached 64 billion pounds, about a quarter of the stock it may buy through the APF.

Purchases of commercial paper were at 2.25 billion pounds. The total amount of new money created will be about 8.75 percent of annual gross domestic product. It is too early to predict how powerful the stimulus will be.

However, the appropriate measures have to be taken over time so that in the medium term the inflation target is met.