Falling house prices would usually herald a return to the property market of the first-time buyer. Not this time. Council of Mortgage Lenders (CML) figures published this month show that the number of loans to first-timers fell to 17,800 in March, down almost 50 per cent from August last year. Over the last five years, the average price paid by a first-time buyer has shot up by 82 per cent, making the average house in 96 per cent of British towns unaffordable, according to the Halifax.

Some prospective homeowners are no doubt happy to sit on the sidelines waiting for prices to fall farther, but many who do want to buy are unable to take advantage of the softening market owing to the credit crunch. Borrowers without savings have been shut out of the market. “It is now impossible to borrow 100 per cent, while even 95 per cent deals are vanishing,” says Melanie Bien, the director of Savills Private Finance, the mortgage broker. “Lenders such as Abbey and Nationwide have recently pulled the majority of their 90 per cent-plus mortgage ranges, while Alliance & Leicester, Britannia, and Cheltenham & Gloucester will no longer lend above 90 per cent either.”

Even those borrowers who have saved up for a deposit face paying over the odds for their loans. “A number of lenders, including Abbey, Halifax, Nationwide and Alliance & Leicester, now charge a premium for anyone borrowing above 75 per cent loan to value,” Bien says. “So unless you have a sizeable deposit, you won't get access to the cheapest rates of interest.”

A borrower with a deposit of just 10 per cent will pay 0.75 percentage points more than someone with a 25 per cent deposit, which equates to an extra monthly interest payment of £93 on a £150,000 mortgage loan. “Borrowers with small deposits needing a higher income multiple have fallen out of the race,” says Katie Tucker, of Charcol, the mortgage broker. “It is more important than ever to have a spotless credit history and a 10 per cent deposit.”

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Unsurprisingly, the first-timers who are able to buy are those with well-paid jobs. Tucker says that the average income multiple of normal and first-time buyers who arranged loans through Charcol in April was the same: 2.8 per cent times earned household income. “Historically, first-time buyers have needed to multiply their income by more than normal buyers would, to get the loan size they needed, but the two have now converged,” she says. “This implies that the few first-time buyers who bought were those with high incomes.”

While the lending situation is frustrating for prospective homeowners, some experts argue that the credit crunch could turn out to be a blessing in disguise. “With current levels of uncertainty and volatility surrounding the mortgage industry and the housing market, maybe it's worth sitting on the sidelines,” says Andrew Hagger, of Moneyfacts, the financial information service. “If property prices were to fall by 15 per cent in the next 18 months - which is conservative compared with some estimates - then those itching to get their foot on the housing ladder could benefit from a double whammy of very good savings rates, which are currently at a seven-year high, and the falling cost of that elusive first property.”

For those keen to get on to the housing ladder, saving as much as possible is essential, because it is unlikely that the mortgage situation will improve significantly over the medium term. “A return to deals of 100 or even 95 per cent is increasingly unlikely,” Bien says.

First-time buyers who are unable to come up with the requisite deposit do have one option to consider: relying on help from developers. “First-time buyers across the country are benefiting from a plethora of developer incentives as house builders try to sell remaining stock,” says David Bexon, the managing director of SmartNewHomes.com, a new homes website. “Now is a great time to drive a hard bargain.” Incentives include help with deposits, legal fees and stamp duty, subsidised mortgage payments, cash back or fitted kitchens and carpets included in the property price.

David Wilson Homes offers the Head Start scheme on a number of developments: first-time buyers pay 85 per cent of the purchase price of the property with no deposit, with the remaining 15 per cent offered as an interest-free loan by the developer. The deferred amount is paid back as 15 per cent of the property's open-market value within ten years of purchase, or at the time of re-sale if this is earlier. Barratt is also offering the Head Start scheme on some of its developments, including those in Chelmsford and Witham.

Linden Homes South East is offering £750 a month towards mortgage payments for the first 18 months on properties in Tunbridge Wells, Kent, and Cuckfield Village in West Sussex. Redrow also has a mortgage subsidy offer of up to £500 towards monthly mortgage repayments until 2010, at its development in Caerphilly.

Samantha Pike is one of those first-time buyers who has been helped by a developer offering an assisted deposit scheme. Pike, 21, who works for a vehicle breakdown firm, and her boyfriend, Dale Denton, 24, purchased a two-bedroom, two-bathroom apartment in Colchester from Higgins Home for £162,000, with the developer contributing the extra £8,550.

As so many buyers are discovering now, tracking down the right mortgage offer was tricky: the number of lenders who will participate in assisted deposit schemes is limited. However, once the financing had been arranged, the purchase went very smoothly. Pike says: “Once we'd got our mortgage offer, the whole deal was very straightforward.”

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