More than a fifth of those with mortgages could find themselves in negative equity if house prices continue to slide, according to a new report.

Fitch Ratings say plummeting property values have already seen one in ten borrowers now owing more on their mortgage than their home is worth.

The group has warned the number could rise to almost a quarter if prices fall by a further 14 per cent.

An analysis of 2.7 million prime mortgages found 270,000 borrowers with good credit histories are now financially 'underwater'.

It echoes a recent Bank of England report which estimated that as many as 11 per cent of mortgage holders were in negative equity in the first quarter of the year.

But the Bank said despite a 20 per cent fall in house prices between the autumn of 2007 and spring this year, most homeowners had large equity cushions to fall back on.

The Fitch study spotted huge regional differences, which it said were partly driven by the fact that house prices have fallen by varying degrees across the UK.

Northampton was said to have the highest proportion of borrowers who owe more than the value of their home at 17 per cent.

The East Midlands was the worst affected region, with 15 per cent of borrowers and 22 per cent of mortgages by value in negative equity.

Scotland, on the other hand, had the lowest proportion of borrowers in this position, at under 4 per cent by number and less than 5 per cent by value.

Lenders with the largest proportion of homeowners in negative equity include Northern Rock and Bradford & Bingley, both of which had to be rescued by the state.

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