When Benny Raz moved house 15 years ago, Karnei Shomron seemed like an obvious choice. It sits on a hilltop surrounded by rocky slopes stretching to the horizon and is only a few minutes' drive from the major cities of central Israel. Discounted prices meant he could upgrade to a spacious, seven-bedroomed house with a view. To make it even more tempting the government gave him a subsidised mortgage.

In this small, quiet town of fewer than 5,000 people was a country club, with swimming pool, tennis courts, green public parks and a fresh mountain breeze. "We came here and saw a beautiful place and so we bought a house," said Raz, 56.

Karnei Shomron is, however, also deep inside the occupied West Bank, a Jewish settlement not far from the Palestinian city of Nablus and, under international law, illegal. But when Raz and his family moved here in 1994 they and their neighbours did not consider themselves settlers. It was the time of the Oslo peace accords and a moment of what Raz called "euphoria" about how Israelis and Palestinians might live together in peace. It was also, ironically, a time of accelerated settlement growth.

"I came just for a good life. I'm not ideological," said Raz.

There are thousands, perhaps tens of thousands more settlers like him who moved to the West Bank to take advantage of state-subsidised discounts, the so-called economic settlers.

Now Raz has come to realise there is no place for settlers like him if a peace agreement is ever to be struck with the Palestinians. He is one of the founders of an organisation called Bayit Ehad, or One Home, which is trying to convince the Israeli government to offer financial compensation to allow those settlers to move back into Israel. "The government helped me to come and the government must help me go," he said.

His change of heart happened gradually. There was the violence of the second intifada, the Palestinian uprising, which came into the heart of the settlement in February 2002 when a suicide bomber blew himself up in a pizzeria at the Karnei Shomron shopping mall, killing three Israeli teenagers. Raz was there at the time, with his daughter, and lost his hearing in one ear.

Then there was the growth in Israeli army checkpoints and an increased sense of vulnerability. When Israel began building its vast concrete and steel West Bank barrier, its long snaking route did not stretch around Karnei Shomron, leaving them and 70,000 other settlers to the east feeling vulnerable. The settler movement has also changed, with secular Israelis losing influence to a more hardline, religious and millenarian element. Then, four years ago, Israel withdrew its soldiers and settlers from Gaza. At that point Raz and others like him came to realise their days as settlers in Karnei Shomron might be numbered and they started to canvass for support among Israeli politicians. "I started to ask questions and nobody wanted to talk to me," he said. "The problem was the new border. I asked if the Israeli government had a plan to leave this place and take the people away from here. I don't want to wait.

"If you have a plan to take me from here, take me now. But you must help me."

Of course, Raz could simply sell his house today but it would make less than half its original price, and far less than he has spent on mortgage payments. House prices in settlements beyond Israel's barrier have dropped with the realisation that the "security fence" is probably Israel's idea of a final border.

Rightwing Israeli politicians did not want to listen to his concerns, but eventually Raz found an ally in Avshalom Vilan, who was at the time an MP for the leftwing Meretz party. Vilan helped draw up an evacuation compensation plan under which he proposed the government would pay a reasonable price for homes that settlers wanted to leave. The buildings would then be sealed and it would be a criminal act punishable by five years in jail for anyone who tried to live in the houses. Vilan made many visits to the settlements and now believes tens of thousands of West Bank settlers might be interested.

"I found as many as half the settlers didn't come for ideology but for a better quality of life or because they wanted a new villa," he said. If his estimate is even close to accurate, it suggests it may be far easier to convince many settlers to leave than the Israeli government would have the world believe.

The idea was considered by the last government, under the then prime minister Ehud Olmert, but was eventually dropped because of pressure from influential rightwing, pro-settler parties.

Vilan argues a two-state settlement to the conflict is inevitable. "It's the only game in town," he said. "At the end of the day it's well known that this is going to happen so why not do it before and give these people the chance to get out?" He is hoping to revive the compensation proposal and has written to the current prime minister, Benjamin Netanyahu, with whom he did military service in the same unit. But several weeks later he is still awaiting a reply.

Part of the problem is that few of the economic settlers are prepared to speak out as publicly as Raz. There are often disagreements even within families. Raz's son Roy, 26, does not identify himself as a settler, despite his address, and talks enthusiastically about having Palestinian friends. But he is worried that leaving the West Bank might only encourage a more violent reaction against Israel from Palestinian terrorists.

"I think a resolution will include the fact that we are going to leave this place and if it's necessary to have a decent peace I would do it," he said. "But I don't see how it can happen. I don't see how Israel would be protected and secure."

Raz himself believes he lost his job working in the settlement municipality because of his political views. He says he has been taunted and threatened by other settlers who see him as a challenge to their way of life. There is little doubt they do not relish his presence.

One recent afternoon Raz stood on a deserted road at the outskirts of Karnei Shomron pointing out a nearby Palestinian village and the rolls of barbed wire fence between them. Another settler suddenly drove up in his car, stopped, took several photographs of Raz and then crudely thrust his middle finger at him before accelerating away.