Homeowners with 100 per cent mortgages have been warned that falling property prices could leave them in unforeseen financial difficulty.

With house price inflation slowing and Halifax reporting that the market experienced a fall in September for the first time in nine months, the Motley Fool stated that some 100 per cent mortgage holders could soon find themselves in negative equity.

This type of mortgage is popular among first-time buyers and, although it can offer them an accessible way of getting on to the property ladder, a slight dip in house prices could mean that the value of their home becomes less than the amount they owe on their mortgage, according to the personal finance website.

"Borrowers on 100 per cent mortgages need to be aware that stagnant house prices may keep them shackled to their uncompetitive lender and prisoners in their own home until house prices rise," said David Kuo, head of personal finance at the Motley Fool.

"However, they can tip the scale in their favour by ensuring that they choose repayment mortgages rather than the cheaper interest-only options," he added.

The Bank of England's monetary policy committee voted to maintain interest rates at 5.75 per cent last week.

Self storage can be useful for buyers on a budget.


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