The number of first-time buyers has dropped by 8% in a year as soaring house prices and rising interest price young people out of the market.

The figure is likely to fall further if rates rise tomorrow as expected, according to the Council of Mortgage Lenders, which said that affordability is at its lowest level for 16 years, reports The Telegraph.

Experts urged homeowners to take advantage of the small number of attractive mortgage deals left on the market, particularly if they want the security of a fixed rate.

"Finding a two-year fix at below five per cent is now almost impossible but there are a few available," said Melanie Bien, of Savills Private Finance, a mortgage broker.

"The Monetary Policy Committee is widely tipped to raise interest rates by at least a quarter point this Thursday and lenders are repricing fixed rates upwards accordingly."

Fixed rate deals are becoming increasingly popular as stretched homeowners opt for payments that are set.  Fixed rate deals accounted for a record 78 per cent of all loans, up from 75 per cent in February.

The CML said that 88 per cent of first-time buyers surveyed chose this type of mortgage during March, the highest proportion ever recorded.

Fixies still represent ‘good value’

Nick Gardner, a mortgage broker at Chase De Vere, said: "Fixes, although they have got more expensive in recent weeks, still represent good value for the cautious borrowers because of the peace of mind that they offer.

"That said, there is a compelling argument to look at variable rates right now.

"Newcastle has an excellent discounted rate of just 4.65 per cent for two years, with a £999 fee.

"This is 2.69 per cent off its standard variable rate, and basically means that borrowers could see two or even three more quarter point rises before this deal becomes as expensive as the two and five year fixes currently on offer.

"It's an excellent option and we expect it to be snapped up in the coming days."

Huge barriers to ownership

David Stubbs, an economist at the Royal Institution of Chartered Surveyors, said that the CML figures showed that first-time buyers faced huge barriers to home ownership.

"They have to save large amounts for deposits, stamp duty and fees and then must spend an ever increasing share of their income on servicing the massive mortgage needed to buy a home," he said. "With higher interest rates on the way, the situation looks certain to deteriorate further in the coming months."

The CML said the typical maiden homebuyer spent 18.3 per cent of their income on mortgage interest payments in March, up from 16 per cent in the same month last year.

This means that the proportion of first-time buyers' salaries consumed by mortgage payments is at its highest level since 1991, records show.

The CML also revealed that the size of loans compared to salaries has risen in the face of high house price inflation.

First-time buyers in March took out a home loan that was on average 3.31 times their income, up from 3.15 in the same month last year.

Difficult times ahead for the housing market

Liberal Democrat Treasury spokesman Vince Cable said: "These figures clearly highlight the difficulties facing first-time buyers across the country.

"While it is reassuring that many first-time buyers are taking out fixed rate mortgages, this week's expected rise in interest rates will put many other homeowners under more severe financial pressure. The fact that the number of first-time buyers is down eight per cent year on year could indicate difficult times ahead for the housing market."

Nicholas Leeming, Director of Propertyfinder.com said:

“CML figures today show that the number of first time buyers in the market has fallen 8% over the last twelve months. This is in line with our own figures showing how the proportion of first time buyers has fallen from one third of buyers a year ago, to less than a quarter today. Rising interest rates and higher house prices are taking mortgages out of their reach.  Another rate rise, a dead cert for this Thursday, is only going to make matters worse.

Home ownership is falling in the UK as more people choose, or are forced, to rent.  We estimate that around 3.1 million of today’s over 30s who had expected to retire in their own homes will actually live out their golden years in rented accommodation.