Homeowners warned of negative equity risk

Research from mform.co.uk has found that as many as 33,000 first-time buyers have taken out mortgages with a loan-to-value of at least 100 per cent over the past 20 months, with the firm suggesting that these buyers are now at risk of negative equity.

Should house prices now fall, these buyers will be at risk of their property being worth less than the value of their mortgage, the company has advised.

The report comes as new research from the Mortgage Advice Bureau shows that the number of borrowers who took out a mortgage in the first nine months of 2007 has more than doubled when compared to the same period in 2006.

"Rising property prices has meant that people need to borrow even more money to get the property they want and lenders have responded to this by dramatically increasing the number of 100 per cent mortgages available," said mform managing director Francis Ghiloni.

"In April this year, our research showed that there were 92 different 100 per cent mortgages to choose from, but by October 1st this had increased to 160," Mr Ghiloni added.

But with recent house price studies showing strong price gains this month, some first-time buyers may feel the risks of negative equity are receding, for now at least.

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