Merrill Lynch’s wrote off £3.85bn in bad credit mortgage debts last week, and showed the exit door to chief executive Stan O’Neal on Tuesday.

The Exchange Commission is investigating how Merrill valued securities tied to mortgages and how it disclosed them to investors in an attempted to cover up the true size of the losses.

It has been suggested that Merrill sold mortgage papers to hedge funds, on the understanding it would buy them back later at a fixed price. This allowed the bank to remove debts temporarily from its balance sheet – a former Enron tactic.

Leading New York securities lawyer Jacob Zamansky said: ‘If it turns out that Merrill played games in valuing their portfolio, there will be lawsuits.’

Experts expect Merrill to write of at least another $4bn in the next quarter because of bad credit mortgage debts.

For the last decade the country has experienced a continuous boom in the housing market, which currently shows no end and is outstripping the rise in people’s incomes.

Mortgage borrowing is still thriving, but it is warned that first-times buyers will now be forced out of the housing market and drag it down.

It is suggested that 40% of first-time buyers now enlist the help of their parents when buying a home. Half of those parents were contributing towards their deposit and 17% were helping with monthly repayments.

It is clear that first-time buyers are finding it hard to get a deposit together and that asking relatives is the only option for them, resulting in many parents pooling equity from their own properties. Repayments aren’t so much the issue, it is finding the money in the first place, to get a property.

With house prices constantly rising there is a certain amount of panic buying in order to secure a property before the prices go out of reach. Only 20% of 20-24 year olds are home owners compared with 34% in 1994. It is also estimated that 20% of ‘apparent’ first-time buyers are older buyers returned to the property after a spell in rented accommodation.

First-time buyers can now expect to pay £176,070, which is an increase of 11.9% since last August, and many are stretching themselves to breaking point in order to get a foot on the housing ladder.

This means that first-time buyers are making themselves vulnerable despite the increase in income and the sharp increase in the proportion of new mortgages with high loan and multiple incomes, isn’t helping.

On average it is estimated that parents are shelling out £21,314 to help their children to get on the property ladder, with around 20% having already dipped into their savings and a further 22% planning to when the time presents itself. IFAs are reporting that the new average age for first-time buyers is 34.

Lack of affordable housing for single first-time buyers has forced people into multiple income mortgages and has resulted in the rate of borrowing increasing to 3.38 times the combined salary.

With the average house price in England currently sitting at £ 226,902 and the average house price inflation rising by around 11.4%, what are first-time buyers hopes of ever getting a foot on the rung of the property ladder?

With the UK economy built largely on a housing bubble that is about to burst, are we finally going to see an end to the rocketing housing prices? The International Monetary Fund has estimated that we are paying up to 40% too much for a roof over our heads and the growing credit crisis is only going to have more of an impact on house prices.

In mid 2005 America’s housing market hit a slump. This was coupled with a huge rise in borrowing costs and saw many home owners unable to meet the cost of mortgage repayments.

It has been noted that the steep increase in housing prices in the UK has been met by an increase in wages, with people here now earning around nine times an annual average income. The Bank of England has attempted to cool inflation and stabilise the economy by raising interest rates five times since August of 2006, which seems to be working, but not before house buyers get themselves stuck in the ever deeping money pit.

Concerned home owners should note that housing markets in the UK have generally avoided a ‘bad credit’ mortgage market which collapsed the US, but that an increase in immigration and lack of housing, could continue to draw out the prices we are currently experiencing.

Alistair Darling said banks and building societies must be more responsible with their lending to stop for fuelling an ‘unsustainable’ boom in house prices

This follows a warning from the IMF saying Britain’s economy was hugely susceptible to a housing-market slump.

Mr Darling said ‘An unsustainable house price inflation is not good for individuals, is not good for the economy, so I think it will slow down
He demanded Banks ask ‘more searching questions’ to prevent borrowers overstretching themselves  and take more account of whether the borrower is able to pay back the loan.

Last year Abbey, Britain’s second-biggest lender, changed its rules allowing it to grant loans of five times the borrower’s salary, and sometimes up to seven times.