According to recent reports the 100% mortgage could be on its way back through a government backed scheme aimed at first time buyers and low income households after being wiped from the shelves earlier this year by worried lenders that did not want to take the risks associated with these mortgages during the ongoing global credit crunch.

It is thought that the return of the 100% mortgage could be fuelled by taxpayers’ own cash, as ministers try to find ways to tempt first time buyers into buying and moving into the many empty new homes that are around.

Ministers are pledging around £400 million to back the loans through a scheme that is designed to help those on lower incomes and first time buyers to get their foot onto the property ladder in an increasingly difficult market. If the scheme is successful thousands of homes that have been left lying empty after the burst of the housing bubble could finally find themselves occupied again.

However, there concerns amongst some officials that house prices are set to continue falling and those that take up the 100% mortgage scheme could find themselves quickly plunged into negative equity, where they end up owing more on their property than the property is actually worth.

One Liberal Democrat official said: ‘First-time buyers are being bribed into a falling market, putting them at serious risk of negative equity.’

The shadow housing secretary stated that the scheme ‘is yet another example of media-orientated policy being announced on the hoof’. However, the Labour Housing Minister, Margaret Beckett, said: ‘We are determined to give families real help in the current economic climate.’

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