First-time homeowners who took out large loans to get on to the property ladder face a double whammy of negative equity and pricier mortgages because of falling property prices.

Aspiring buyers may welcome falling house prices, but tens of thousands of young borrowers who made it on to the ladder last year are now in danger of owing more than their home is worth. In addition, they may be forced to find more cash to cover mortgage repayments as banks, which introduced stricter lending rules after the summer credit crunch, force them to take up deals with higher interest rates.

Deals worth 95 per cent of a home loan have now become commonplace, with some banks and building societies lending as much as 120 per cent of a property’s value. The Council of Mortgage Lenders says that half of first-time buyers take out loans for more than 90 per cent of the value of their new home. Any significant falls in house prices leave these borrowers in negative equity.

Those who took cheaper interest-only deals are at very high risk, because they are not paying back any of the capital. Even buyers who are repaying capital are vulnerable, as very little is eroded in the first few years of a mortgage.

Debt groups blamed “irresponsible” lending by banks for the bleak outlook now facing new homeowners. About a quarter of mortgages sold by the troubled bank Northern Rock in the first half of 2007 were its popular “Together” deals that offer cash-strapped first-time buyers loans worth up to 120 per cent of the property value.

Chris Tapp, director of Credit Action, the debt charity, said: “Lenders must take some responsibility for this. During summer, at a time when everyone could see the property bubble was about to burst, some, such as Abbey, were still actively promoting loans for up to 125 per cent.”

The average price of a first-time buyer property has already fallen by 4.46 per cent from June to December last year, according to Halifax; from £154,746 to £147,834, while house prices are predicted to fall by as much as 10 per cent over the next three years, according to Citigroup. Prices of first-time buyer homes have so far fallen more than other properties.