More than 10,000 homeowners are at risk of becoming mortgage prisoners as a negative equity “time bomb” looms, new information suggests.
The number of houses purchased with a loan worth 95pc or more of the value of the property doubled last year, according to figures released under a Freedom of Information request.
These homes are most at risk of falling into negative equity, with house prices set to fall by 7pc by the end of 2024, according to the latest forecast by the Office for Budget Responsibility.
The figures from the Financial Conduct Authority (FCA) show that just 2.26pc of homes were bought with a loan to value ratio of 95pc in 2021.
The FCA expects that in 2023, the figure will be 4.25pc, meaning that 10,650 homeowners are at significant risk of sliding into negative equity.
This accounts for close to one in 20 of all those who bought a home with a loan in the first two quarters of the year.
Sarah Olney, the Liberal Democrat spokesman for the Treasury, said: “Soaring mortgage rates combined with falling house prices are creating a negative equity ticking time bomb.
“Those falling into negative equity face becoming mortgage prisoners, trapped in their home and at risk of being hit by higher rates.
“Ministers and the regulator need to come up with a plan to help homeowners on the brink. The Conservative government crashed the economy and sent mortgage rates through the roof, they have a responsibility to help those now paying the price.”
