Mortgage brokers Charcol plan to launch the first negative equity mortgage in more than a decade, amid falling house prices and expectations of a post-election interest rate rise.

"It will be competitively priced compared with other five-year fixed rate mortgages," Ray Boulger, of Charcol, told Times Online. "The key to any product is the pricing has to be right as well as what it's offering."

The news comes as Hometrack's monthly survey reported average house prices falling by 0.1 per cent in April. It is the tenth consecutive monthly decline in house prices recorded by the property research company. The slide takes the average property in the UK to around £162,000. John Wriglesworth, Hometrack's housing economist, says the housing market "remains in the doldrums".

This follows the Nationwide's March figures in which house prices fell at their steepest rate in nearly ten years, with the value of the average home dropping by 0.6 per cent.

Against the unsettling nature of the housing market, the negative equity mortgage, Charcol says, is aimed at offering reassurance to potential first-time buyers, and is available to all borrowers able to put down a minimum 5 per cent deposit.

Under the terms of the negative equity mortgage, if homeowners later need to move and their property is worth less than the mortgage, they will not be liable to pay any shortfall.

"We've been looking at doing this for about a year and a half but the market was still strong," says Mr Boulger. "Now the market's just right, there's still a lot of nervousness about. It's targeted for first-time buyers but not limited to them."

Charcol's mortgage offer also comes with free accident, sickness and unemployment cover.

Charcol intends to price the mortgage at below 5 per cent to make it competitive.

Mr Bolger said: "The mortgage will cover people for five years at a fixed rate. In the event they have to claim on their ASU policy, if they are still claiming after six months and choose to sell, the policy will click in and pick up any loss made."

Halifax tried to insure against negative equity in 1994, launching its product at the tailend of the biggest house price crash experienced in recent times. But the product proved too expensive and attracted few borrowers since property prices had long since turned.