Following a surge of activity in first time buyers entering the housing and home owner loan market towards the back end of last year, numbers are now starting to drop, as many are struggling to be able to afford the cost of a new loan due to the increase in house prices, according to one estate agent.

Marsh and Parsons, based in London, have said that they have seen a drop off in the number of first time buyers purchasing property and applying for loans and they blame rising house prices for pushing up the affordability of property and a home owner loan.

At the beginning of last year, the estate agent said that 17 per cent of all its customers were first time buyers, but by January this year, that figure had dropped to just 10 per cent and in February, the figure had fallen even further.

Whilst estate agents in other parts of the country have experienced a similar situation with regard to first time buyers, largely due to the end of the stamp duty holiday in December last year, this does not apply to the same degree in the London area, as the vast majority of properties are well above the stamp duty threshold of even £175,000.

Between the start of 2008 and April 2009, the average London property fell in value by around 30 per cent, making a home owner loan for first time buyers more affordable in this area, but with prices rising by around 13 per cent over the course of the past twelve months, many are simply unable to afford the monthly loan repayments.

Peter Rollings of Marsh and Parsons said “Central London may not be typical first time buyer territory, but it’s little wonder why. Mortgage lenders now typically require a 25 per cent deposit from first time buyers, meaning they would need to put down over £84,000 to purchase the average London property, realistic for only the tiny minority with substantial parental assistance.”