Adam Thompson, 29, an RAF engineer, bought a three-bed terrace house in Birkenhead with his wife two years ago using a joint 125 per cent mortgage from Coventry Building Society.

The couple, who are keen to sell up, separated 12 months ago and are struggling to pay the mortgage of £645 a month.

Although the house has risen marginally in price, the loan is still worth substantially more, leaving them with negative equity. They bought for £96,950 in September 2006 but borrowed £113,000, with 95 per cent secured against the property. An estate agent estimated the house should be on the market for £105,000.

Mr Thompson was not worried by the size of mortgage in 2006. “The previous occupant had seen the house almost double in three years. I thought we would have plenty of time to watch the value rise before we sold it,” he said.

To make matters worse, their mortgage lender will levy an early repayment fee of about £5,000 for clearing the loan before September 2009. Mr Thompson estimates he will owe at least £5,000 after the property has been sold.