Gary Wylie, 26, is facing the spectre of negative equity on the two-bed flat in Glasgow he bought with his wife, Rachel, 25, in November 2006. The couple, who have a nine-month-old daughter, are anxiously watching the market to see if prices continue to fall before deciding whether to put their current home up for sale.

They used a 100 per cent mortgage to buy their flat, paying £128,000. They are now keen to move to a bigger home in a new area, but fear their current flat’s selling price will not clear their home loan. Worryingly, a two-bed flat on their street is on the market for around the same price they paid two years ago, and it remains unsold.

Mr Wylie, a services manager, said: “We’re definitely at risk of negative equity and to be honest if we sold now I’d be pleased if we managed to break even.”

If Mr and Mrs Wylie did fall victim to negative equity they would have to use precious savings to clear their home loan. To further complicate matters for the couple, their current lender, Northern Rock, will only allow 90 per cent of their next home’s value to be covered by the couple’s current five-year fixed rate mortgage deal, which has a rate of 5.99 per cent.

“Finding a bigger deposit for our next home is going to take up most of our savings already, so slipping into negative equity would make the problem even worse for us”.