According to new research from the Council of Mortgage Lenders (CML), thousands of people in the UK could find themselves at risk of negative equity.
It claims that, because of falling house prices, more than 23,000 people who took out a 100 per cent mortgage
during the year ending March 31 could find that the size of their mortgage will exceed the value of their home.
A CML spokesperson told The Guardian: "This in itself is not a problem as long as they are able to continue to pay their mortgage
(as the overwhelming majority do) and in the longer term house price growth and capital repayments will take them back out of negative equity."
"Clearly, we are in a period where we expect house prices to go down. But in the longer term, the market will continue to be underpinned by the shortage of property, house prices will go up again and people will move out of that position, even if they are nominally in negative equity."
According to a recent Halifax house price survey, house prices have fallen five per cent since last March. And experts are expecting further declines in the near future. Global Insight's Howard Archer said: "Global Insight expects house prices to fall by 12 per cent in both 2008 and 2009.
"Furthermore, we see significant downside risks to this forecast, particularly if the Bank of England does end up raising interest rates
The Bank of England's Monetary Policy Committee (MPC) held the base rate at five per cent this month having cut rates by 0.25 per cent on three occasions since last December. However, it is thought that rising inflation may lead to a rate increase next month, which is likely to have a detrimental impact on the mortgage sector.