Halifax owner HBOS warned that the alarming rise in borrowers falling behind with repayments shows no sign of slowing down.
Boss Andy Hornby said arrears would 'of course keep rising' amid deepening economic gloom and growing unemployment.
His warning sent HBOS shares tumbling 22p, or 7%, to 296¾p - perilously close to the 275p level where the group wants to sell £4bn in new stock to investors.
Britain's biggest lender said the value of mortgages in arrears have jumped by 17% since the start of 2008 to £5bn.
Just under 30,000 of HBOS's 2m customers are three months or more behind, and risk having their homes repossessed.
With a third of its borrowers coming off fixed rate deals, tens of thousands more could get into trouble.
Hornby insists the property downturn is 'nothing like the pain and shock we saw in previous cycles'.
But it appears that other HBOS divisions are getting dragged down.
The group slashed the value of its £200m investment in British house-builders by half.
More worrying is the 38% of its £109bn corporate loan book that remains tied to property.
Experts say the corporate lending division could rack up 'hundreds of millions' in further losses if property prices plummet 9% this year, as Hornby predicts.
The carnage in the residential property market has led HBOS to write down the value of its loans to the troubled house-building sector by £100m, indicating that others may have to follow suit.
House-builders are coming under increasing pressure as restricted mortgage lending, falling house prices and fears of large land write-downs worry the sector.
After years of record profits and soaring house prices, speculation is now rife that house-builders will be forced to raise cash with rights issues or debt for equity swaps.
They could even turn to the government for help, like some of the banks have done recently.
It is the first clear sign of the extent of the problem, which will have implications for other investors in the troubled sector as well as the builders themselves, who have been hit hard by the housing slump.
Analysts think the pain will be far more acute for the builders with 80% wiped from the market worth of some plots to bring them into line with current prices.
Analysis's predicts that house prices could fall 6% this year and 8% in 2009 as sales volumes continue to drop.
It is thought that the sharp contraction in mortgage availability has accelerated the house price correction and as a direct result.
Consumers are spending about a third more on rent and mortgages than they were two years ago.
Mortgages in arrears rose from 1.
3% at the end of December 2007 to 1.
43% at the end of May.
However about one in eight homeowners are planning to sell their property in the coming year despite the current housing market downturn, research has shown.
One in five are hoping to boost the value of their home and its' saleability.
Even within the current climate, there are still millions of people who are looking to move and they are doing all they can to get the best price for their property.
The popularity of reality television programmes specialising in home improvement, property investment and interior design have encouraged homeowners (and first time buyers) to invest in their property despite the financial crisis.
With predictions that the current financial state will worsen before they get better, property related debt is on the increase.
Boss Andy Hornby said arrears would 'of course keep rising' amid deepening economic gloom and growing unemployment.
His warning sent HBOS shares tumbling 22p, or 7%, to 296¾p - perilously close to the 275p level where the group wants to sell £4bn in new stock to investors.
Britain's biggest lender said the value of mortgages in arrears have jumped by 17% since the start of 2008 to £5bn.
Just under 30,000 of HBOS's 2m customers are three months or more behind, and risk having their homes repossessed.
With a third of its borrowers coming off fixed rate deals, tens of thousands more could get into trouble.
Hornby insists the property downturn is 'nothing like the pain and shock we saw in previous cycles'.
But it appears that other HBOS divisions are getting dragged down.
The group slashed the value of its £200m investment in British house-builders by half.
More worrying is the 38% of its £109bn corporate loan book that remains tied to property.
Experts say the corporate lending division could rack up 'hundreds of millions' in further losses if property prices plummet 9% this year, as Hornby predicts.
The carnage in the residential property market has led HBOS to write down the value of its loans to the troubled house-building sector by £100m, indicating that others may have to follow suit.
House-builders are coming under increasing pressure as restricted mortgage lending, falling house prices and fears of large land write-downs worry the sector.
After years of record profits and soaring house prices, speculation is now rife that house-builders will be forced to raise cash with rights issues or debt for equity swaps.
They could even turn to the government for help, like some of the banks have done recently.
It is the first clear sign of the extent of the problem, which will have implications for other investors in the troubled sector as well as the builders themselves, who have been hit hard by the housing slump.
Analysts think the pain will be far more acute for the builders with 80% wiped from the market worth of some plots to bring them into line with current prices.
Analysis's predicts that house prices could fall 6% this year and 8% in 2009 as sales volumes continue to drop.
It is thought that the sharp contraction in mortgage availability has accelerated the house price correction and as a direct result.
Consumers are spending about a third more on rent and mortgages than they were two years ago.
Mortgages in arrears rose from 1.
3% at the end of December 2007 to 1.
43% at the end of May.
However about one in eight homeowners are planning to sell their property in the coming year despite the current housing market downturn, research has shown.
One in five are hoping to boost the value of their home and its' saleability.
Even within the current climate, there are still millions of people who are looking to move and they are doing all they can to get the best price for their property.
The popularity of reality television programmes specialising in home improvement, property investment and interior design have encouraged homeowners (and first time buyers) to invest in their property despite the financial crisis.
With predictions that the current financial state will worsen before they get better, property related debt is on the increase.