How do first time buyers plan to secure the funds?

As house prices continue to fall, research from moneysupermarket.com found 13 per cent of 18-34 year olds are considering stepping on to the property ladder for the first time in the next 12 months.

A quarter of first-time house hunters (25 per cent) have the deposit saved already; no mean feat when you consider the average deposit for a first time buyer is £32,000.

The number of mortgage deals available has plummeted 60 per cent over the past 12 months, and deposits of 25 per cent or more are required on many of the leading deals - there is very little choice if you have a deposit of less than 10 per cent, and nothing if you have less than 5 per cent to put down.

For those who have not yet secured their deposit, over a quarter (29 per cent) will take the sensible route to bide their time and rent until they have saved enough money, but 16 per cent are considering the worrying option of taking out a loan to cover the cost.

Louise Cuming, head of mortgages at moneysupermarket.com said: "Taking out a loan to pay for a mortgage deposit is a dangerous move, and must be avoided even if it means you have to delay buying your first home. Anyone who takes a loan is effectively taking out a 100 per cent mortgage through the back door. Not only will the mortgage lender decline the application if it discovers this is the source of the deposit but it is also a huge risk to the borrower - your monthly outgoings will be higher which means there is a greater chance of you finding yourself unable to keep up with repayments."

Some potential first time buyers are playing a waiting game with 14 per cent hanging their hopes on property prices dropping further and six per cent banking on the fact that we'll see 100 per cent mortgage deals return to the market.

Louise Cuming added: "It's easy to see why only 13 per cent of under 34 year olds are planning to get on to the housing ladder at the moment. The need for such a high deposit is pricing many people out of the market. The obsession with equity that has gripped mortgage lenders over the last couple of years has hit first time buyers hardest. Lenders need to concentrate more on assessing the affordability of the mortgage on a case by case basis and less on the size of the deposit if they are serious about improving the mortgage market."