Nationwide Building Society has revealed that things are getting tougher for first-time buyers as they face increasing house prices, coupled with interest rate rises.

Since last year, a typical first-timer is likely to pay £75 more a month on the buying price of a house. When interest rate increases are added, this brings the total to almost £120. And that doesn’t take account of an average £700 more required to make up a five per cent deposit.

Fionnuala Earley, Nationwide’s chief economist, says, “As interest rates have increased to their highest level in over five years, the question of affordability again raises its head. House prices alone increased by just over 10 per cent in 2006, adding almost £14,000 to the cost of a typical first-time buyer property, but three interest rate rises in six months add considerably more to the borrowing costs for this already struggling group.”

Times are getting tougher for first-time house hunters.

Nationwide, in a report of first-time buyers and affordability, points to regional variations in the pattern. Those buying a home in the northern half of England tend to face less of an increase than those in the south. In the North West and West Midlands, for example, the additional monthly payment due to higher house prices and interest rates this year, compared with last, is £81. In the East Midlands it’s £77.

But those in Scotland are likely to have to find an extra £115; in Greater London it is £191; and those in property-price hotspot Northern Ireland are facing a huge hike of £285.

“Of course, much of this is due to the increase in house prices throughout the year,” says Earley. “Keeping interest rates constant, during 2006 the increase in house prices alone would have added £75 to the monthly payment of a typical UK first-time-buyer, simply because of the extra borrowing needed to get on the housing ladder.

“Northern Ireland, where prices increased by a staggering 41 per cent in 2006, stands out particularly. Here, a first-time buyer would have needed to find more than £2,000 extra for a deposit and borrowing costs would be almost £230 per month higher now than at the end of 2005 even without the rate rises.”

Of course, the type of mortgage people are opting for will have an effect too.

Earley says, “Some borrowers will face no increase in their mortgage payment at all. While there was little to choose between the two-year tracker and two-year fixed rate mortgage costs at the end of 2005, developments since then have had a big impact.

“At the end of 2005, financial markets were expecting that the next movement in rates would be down. Taking out a tracker at the end of 2005 would have only cost about £4 less per month than a fixed rate loan, but if you believed the markets and expected a further 0.25 per cent cut in rates, this would have increased the saving to £21 per month. As it turned out rates increased and taking out a fixed rate loan then would have saved around £107 in total to date and an extra £50 per month after the next rate rise takes effect. The biggest savings are in the most expensive areas of London and the South East where the overall amount of borrowing is higher.”

One way borrowers can try to keep their monthly payments down, she suggests, is to increase the term of the loan. Traditionally it is over 25 years, but increasingly first-time buyers have been taking out longer-term mortgages. But she warns, “For those borrowers that do choose a longer-term, this comes at a high price. The total amount repayable on an average property over the full life of the loan would be more than £25,000 higher on a 30-year mortgage than on a 25-year home loan.”

Taking out an interest-only loan is another way to reduce monthly outgoings and 25 per cent of first-time buyers now do so, compared with 20 per cent a year ago. But, again, a cheaper monthly payment now is not without strings. Not making early provision to repay the capital at the end of the mortgage term would be a highly risky and uncomfortable strategy.