Understandably, the plight of first-time buyers has become a big housing-market issue. It is the backdrop to Gordon Brown’s plan to get 3m homes built by 2020 and the obvious downside to rising house prices.

Figures from the Council of Mortgage Lenders (CML) last week underlined the scale of the problem: as recently as spring 2005, 56% of first-time buyers were paying £125,000 or less – the point at which stamp duty is paid. By last December, this figure had dropped to 38%. Most first-timers – 53% in December – now buy in the £125,000-£250,000 range, while 9% are between £250,000 and £500,000, and 1% dip their toes in at £500,000plus.

As prices have risen, so has the pressure on finances.

The CML says affordability for first-time buyers worsened through 2007. By December, more than a fifth of their incomes, 20.7%, went on mortgage interest payments, up from 17.9% a year earlier. Everybody will have examples of new buyers under more strain than that. Similarly, while the average loan for first-timers was 3.38 times income, compared with 3.34 a year earlier, multiples well above those levels abound.

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Background

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Background

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• Held to ransom

Will their plight improve? The CML points out that the Bank of England has cut interest rates twice and, despite inflation worries, further reductions are in the pipeline, which will ease affordability problems – provided, that is, these cuts are passed on to new borrowers. First-timers will also be helped by the fact that they no longer have to compete in a rising market.

Will they still have to fight it out with buy-to-let landlords? The government’s National Housing and Planning Advice Unit (NHPAU), headed by Professor Steve Nickell, a former member of the Bank of England monetary policy committee, believes buy-to-let has pushed up house prices by up to 7% – relatively little when you consider that prices have risen by 130% in real terms over 10 years.

Buy-to-let, it says, has provided many potential first-timers with affordable rented property while they are waiting to get onto the housing ladder, but some have had to compete directly with landlords to buy, and have lost out. An easing of buy-to-let demand will have a significant impact on house-price inflation, the NHPAU says.

One interesting feature of the CML’s data for the market as a whole relates directly to concerns that the credit crisis will reduce the number of mortgages available this year. This is old news: the number of new mortgages for house purchase (as opposed to remortgaging) fell by 10% last year to 1.016m. This was similar to the number of new mortgages in 2005, when house prices flattened and the Nationwide building society recorded a rise of just 3%.

Last year, depending on your choice of measure, prices rose by between 5% and 10%. So a further fall in mortgage loans this year may not be as catastrophic as some suggest. The weakest recent year for new mortgages for house purchase was 1995, when there were just 799,000, and prices fell 2.5%. The following year, with 957,000, prices rose 8.5%. Is this a 2005, a 1995 or even a 1996?

home.economics@sunday-times.co.uk

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