One in 20 first-time buyers could be "imprisoned" in their existing homes if house prices fall, it has been claimed...

Those who recently climbed onto the first rung of the property ladder with a 100 per cent mortgage are at risk, according to personal finance website Fool.co.uk.

It warns that even a small dip in house prices could push such homebuyers into negative equity, meaning that the amount of money left to pay on their mortgage would be greater than the value of their home.

As such first-time buyers on 100 per cent mortgages would be restricted in their ability to shop around for a second home, having failed to build up equity in their first property.

They would effectively be "prisoners in their own home" until house prices lifted again, Fool.co.uk stressed.

Property market likely to slow

The warning follows a series of house price surveys in which analysts have warned that the property market is likely to slow in the coming months, amid higher interest rates and the likely impact of a global credit crunch.

Last week mortgage lender Halifax warned that house prices dipped for the first time in nine months in September. The annual rate of house price inflation slumped to 10.7 per cent over the quarter to last month, down from 11.4 per cent in August.

A stagnant housing market would be bad news for first-time buyers on 100 per cent repayment mortgages because many choose the type of home-loan deal on an interest-only basis, in the hope that property price inflation will give them greater spending power in the market, said Fool.co.uk.

But the personal finance company warns that it could take them up to 34 months to build five per cent equity in their homes and even longer if house prices fall.

Avoid interest only mortgages

It also claims that a lack of 100 per cent mortgage providers means that borrowers could also be stuck with an uncompetitive deal once their initial home-loan agreement ends, usually after a period of around two years.

"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," stressed David Kuo, head of personal finance at Fool.co.uk

"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," he added