FTB woes

First-time buyers (FTBs) may find themselves unable to sell their homes if prices do not continue to rise.

Website Fool says that one in 20 people with their first mortgage run this risk because they have taken out a 100 per cent mortgage.

Most people with this kind of deal rely on prices rising in order to make any kind of profit when they come to selling it on.

However, if prices fall, the homeowner will be in negative equity and will be unable to sell the property and upgrade to a larger home because the value of the house will be lower than the value of the mortgage.

"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 again," said David Kuo, head of personal finance at Fool.

"However, they can tip the scale in their favour by ensuring that they choose repayment mortgages rather than the cheaper interest-only options. They should also overpay their mortgage as often as they can afford. This will ensure that they are regularly chipping away at their debt.

"100 per cent mortgages are supposed to provide first-time buyers with a helping hand onto the housing market. But in a market where house prices stagnate or fall, what providers give with one hand may be taken back with the other when the mortgage deal ends," he added.

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