More than 23,000 homeowners may be stuck with houses worth less than their mortgage debt after taking advantage of 100 per cent home loans as house prices continue to plummet, leaving thousands more Britons at risk of negative equity.

A total of 23,310 people took out 100 per cent mortgage deals over the 12 months to March, figures from the Council of Mortgage Lenders (CML) show. In March alone, 1,470 borrowers secured mortgages for the entire value of their home.

Since last March, house prices have fallen by 5 per cent according to data from Halifax, the UK's biggest lender.

Borrowers who have not made significant overpayments on their 100 per cent home loan are therefore likely to be in negative equity and could make a loss on their houses if they choose to move.

Research from Morgan Stanley, the US investment bank, suggests that many more homeowners may be facing the threat of negative equity, with 370,000 at risk if prices fall by a total of 5 per cent this year and next.

Recent house price figures, including Halifax data showing that prices fell by 2.4 per cent in May alone, prompted economists to forecast house prices will slump by more than 20 per cent in two years.

Morgan Stanley said a 20 per cent decline would plunge 2 million homeowners, or one in six mortgage borrowers, into negative equity.

The CML said that there was no guarantee that all 100 per cent mortgage holders were in negative equity as there was no way of monitoring what level of repayments they had made.

Most 100 per cent mortgage deals have been withdrawn from the market in recent months as banks became more circumspect about their lending in the wake of the credit crunch.

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