Last updated 17:42, Thursday, 19 June 2008

As the old wives say, it’s an ill wind.......

Falling property prices may cause a frisson of fear among homeowners, but the dip will benefit those yet to reach the first rung of the housing ladder.

Hometrack – the housing intelligence company – predicts that a 10 per cent decline in property prices would mean a fifth of those currently priced out of the market could afford a two- bedroom home.

At present, nearly 30 per cent of working people in the UK are unable to consider even their cheapest local house.

The North East is the most affordable part of the country, but even here nearly 20 per cent of first-timers are priced out of home ownership.

Many analysts are forecasting a drop of 10 per cent this year and Hometrack says if its estimates are correct, the proportion of young working households unable to stretch to a mortgage would be reduced by a fifth.

However, the current lack of mortgages will still be a hurdle for many prospective buyers, according to property market analyst Professor Steve Wilcox.

Property prices are falling, but access to the market is being squeezed by the costs and restrictive terms of a reduced supply of mortgage finance.

Professor Steve’s study shows that the cost of repaying a mortgage increased by 12 per cent in 2007, so a home loan ate up nearly 35 per cent of average incomes for first-time buyers.

Ominously, that figure is higher than in 1990 – at the peak of the last house price boom which so quickly tumbled into an almighty crash.....