First time buyers are said to be using the lower interest rates as an opportunity to get onto the property ladder. The rate has been dropped to the lowest level since the Bank of England was founded, 315-years ago.

At present the interest rate stands at 1 per cent, giving homeowners with tracker mortgages more leeway, as their repayments go down with the interest. One mortgage provider even saw some of its borrowers repaying just 8p due to the low interest rates.

However, with the lower interest rates being repaid by borrowers, mortgage lenders are unable to make as much profits and so are resorting to withdraw the mortgages that require lower deposits. For the borrower this means that they will need to have a bigger lump sum to put forward for a mortgage.

Stepping onto the property ladder

This can have positive as well as negative aspects, as although the homeowner will have already paid for a greater portion of the home, they will also need to save up and put more money aside to cover the higher lump sum that is required.

Recent research from Abbey Savings has indicated that two out of five prospective first time buyers are now saving even more so they can save up for bigger deposits in 2009. More than a third of people, who are already saving up are looking to increase how much they save. Also 40 per cent of people who don’t have any form of savings will so do within this year.

House prices have also been seen dropping in drastic style. According to the BBC the average house price in Greater London has fallen by 10 per cent in the last three months.

With house prices looking increasingly affordable, those with a deposit say that they intended to try and save an extra £203, on average each month this year, so that they can get on to the property ladder. While those who were just beginning to save a deposit said that they intended to put away £123 on average each month, according to Abbey Savings. However, 15 per cent of first time buyers stated that they would be cutting back on their deposit savings; planning to spend on average just £74 each month. First time buyers stated that they believed an average of £20,000 was needed to put aside as a deposit for a home.

Reza Attar-Zadeh, director of savings and investments at Abbey, said: "Homeownership is beginning to look like a much more realistic goal for thousands of first-time buyers who have clearly been keeping an eye on house prices.

"Building a deposit is no small task, but those who have chosen to start putting extra money away are clearly better prepared to make an offer on a property when they see their opportunity. Savers need to be aware that a large deposit will make it easier for them to be accepted for the best mortgage deal."

Pulling away from the mortgage market

However not all first time buyers are viewing the low prices with rose tinted glasses. Fifty-eight per cent of first time buyers were unable to get a mortgage from their broker, in the final three months of 2008, according to IMLA. This caused eight out of ten, first time buyers who had been turned down to rent properties instead.

Peter Williams continues, "The first time buyers end of the market has been hit extremely hard by lenders tightening their LTVs. For youngsters without a substantial deposit, the only alternative is renting. The private rented sector is going to have to pick up the slack."

However, IMLA is concerned that the buy-to-let mortgage market is also contracting rapidly. The private rented sector will not be able to grow and support increased demand for rented property if private investors cannot get mortgage finance from lenders.

Mr Williams continued, "If we are to see a genuine contraction in homeownership in the UK, the government must put its money where its mouth is. They must promote non-banks to the bank bail-out premiership.

"Currently, intermediary lenders who traditionally serve the buy-to-let market are being frozen out by the government - without support helping them to free up cash to lend, the buy-to-let market will suffer further retrenchment. This is a vital component of the UK housing market and the government are currently ignoring its need."