According to industry officials there could be serious problems ahead for many middle class families who took out interest only mortgages, with many facing the prospect of being unable to move for many years to come due to plummeting property prices and negative equity.

For those that need to move due to job changes and those that have seen their family grow and need to move to a larger property this could create serious problems.

Reports from the UK’s financial regulator, the Financial Services Authority, have suggested that around four in every ten households have interest only mortgages, where their repayments are applied only to the interest on the mortgage loan, which means that at the end of the mortgage term the borrower still owes the full amount of the mortgage loan minus the interest.

Many people opted for these loans because the repayments are significantly lower than with a capital and interest mortgage.

However, many of those taking out interest only loans had been relying in increases in property values to repay the balance at the end of the loan tern, and with property prices having plunged over the past couple of years millions have been left facing negative equity, which leaves them tied to their property and unable to move, possibly for many years.

It is thought that over four millions homeowners may have to stay put because of this problem.

One economist stated: ‘With prices having fallen as much as they have already many homeowners will find that they simply won’t be able to move home. Any equity they did have has gone because of the fall in property prices. And having made no effort to repay their mortgage they may find lenders are reluctant to lend to them again. They are going to have to wait until house prices climb back to the levels they were in 2007. We believe that could take many years.’

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