The latest RICS affordability index reveals that it could now be 351 per cent more costly to buy a home than in 1996, when accessibility was optimal. According to the institute, a couple on lower quartile earnings (£26,595 after taxes) looking to buy their first property will now have to save up to the equivalent of 104 per cent of joint net salary in order to find the £27,729 needed for up-front buying costs on a typical home.

Senior economist, David Stubbs, says: “At the start of 2008, first-time buyers are finding it even harder to get a foothold on the housing ladder and the signs are that conditions are unlikely to get better in the short term. Mortgage lenders are demanding ever higher deposits as the credit crunch continues to take effect.”

The market has been affected by slight reductions in loan-to-value ratios offered to first-time buyers and other costs of buying a home such as stamp duty. Meanwhile, affordability is a major stumbling block, with a couple on lower quartile earnings forced to spend 40.3 per cent of their combined net wage on mortgage repayments.

Furthermore, RICS believes repossession levels will continue to rise, predicting that 123 homes will be repossessed each day this year.

“Those who are struggling with mortgage repayments are still faced with paying a large percentage of take home pay but there may be some release of pressure as earnings continue to rise. If the Bank of England cuts interest rates next week, many will breathe a sigh of relief,” says Mr Stubbs.

The FSA is also expecting trouble for homeowners, especially those who took out mortgages between 2005 and 2007. Indeed, its Financial Risk Outlook states that more than a million homeowners may struggle financially and may even lose their homes. However, chairman, Callum McCarthy, makes it clear that the FSA is highlighting potential risks rather than making firm predictions.

The authority also indicates that mortgage rates look set to rise and warns those coming to the end of fixed rate mortgage deals to be prepared. “Consumers near the end of a fixed-rate (or other product with a fixed term) will need to start planning early to be able to cope with the potential increase in the cost of these products,” it says.

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