First-time buyers spend 35% of pay on mortgage but house prices plummet for sixth month in a row

First-time buyers are spending more than a third of their take-home pay on their mortgage, official figures have revealed - while house prices are falling at their fastest in a decade.

In a deeply worrying sign, the proportion of income going on mortgages is at its highest for first-time buyers since the last property crash in 1991, swallowing 35 per cent of disposable monthly income.

Financial advisers have warned that massive mortgages are "a disaster waiting to happen".

Fears will be fuelled by the sales figures for the three months to January, which show house prices are now falling at their fastest rate in at least a decade - despite last year's interest cut.

The Royal Institute of Chartered Surveyors' monthly house prices balance dropped for the sixth straight month, to -54.7 last month from -49.1 in December.

The fall was far worse than the -51.0 which analysts had predicted.

The Royal Institution of Chartered Surveyors (RICS) blamed the drop on weakening demand as new buyer enquiries in England and Wales fall faster and faster.

The stock of unsold property also jumped.

Yesterday's mortgage figures from the Council of Mortgage Lenders (CML) underline the problem facing would-be young buyers.

Typically they need to borrow £118,000 compared to just £71,000 five years ago - an increase of 66 per cent, far outstripping the typical annual pay rise of three per cent.

The interest on their home loans eats up 20.7 per cent of their gross income - but this is not a true reflection of the total costs they face.

In terms of actual take-home pay rather than gross income, and taking into account total mortgage repayments including capital as well as interest, the percentage spent soars to 35 per cent.

Rocketing bills for other household expenses such as energy and food – where some prices are rising at their fastest since records began – pile on the pressure.

Philippa Gee, investments director of financial advisers Torquil Clark, said: "This is a disaster waiting to happen.

"The situation may be even more serious than it was in 1991 because so many other costs are spiralling.

"The financial squeeze may be too great for many. The extraordinary prices for petrol, gas and electricity combined with mortgage payments will push people over the edge.

"It will have a devastating effect on many people's lives."

The CML figures show that, to add to their woes, record numbers of first-time buyers are having to pay stamp duty.

Just 38 per cent avoided the tax, which is charged on all homes bought for £125,000 or more. Two years ago, most fell below the threshold.

Experts predict that about 125 homes will be repossessed every day this year as owners lose the fight to keep a roof over their heads.

Many young buyers will be among the victims as they are most likely to have bought recently at today's record prices.

Soaring numbers of people are putting their homes up for sale but not finding a buyer.

Since September, the number of homes for sale has jumped 42 per cent. The new RICS figures show the average number is now 85, the highest for nearly a decade.

Potential buyers are being put off by the fear that a property which they buy today will be worth less tomorrow.

House prices are falling in every part of England and Wales, according to the RICS.

"A lack of demand and confidence in the housing market is clearly behind the recent price slowdown. Tightening mortgage lending criteria is a block to many who are keen to take the housing market plunge," said a spokesman.

"Agents are finding it difficult to market properties to an audience which has decided to watch the current economic theatre from the wings."

The Bank of England cut interest rates in December and then last week to 5.25 percent to shore up the economy but many experts say Britain's housing market is still set for a marked slowdown this year after several years of stellar growth.

The RICS said conditions might stabilise if mortgage lenders started passing on rate cuts to their consumers and unemployment did not start rising.

"The market need only fear a significant fall in prices if job losses start to multiply," he said.

Likewise the CML said it hoped the crisis for first-time buyers would ease this year and that interest rates, cut last week to 5.25 per cent, would fall again.