HOUSES for new buyers are the most affordable they have been since 1996, a new survey indicates.

It now takes 14pc of a first-time buyer couple's income to service a mortgage compared with 26pc at the height of the boom, figures from DKM Economic Consultants and EBS Building Society show.

Despite this, potential new buyers continue to wait for the fall in house prices to end before buying.

Potential house buyers are concerned about negative equity, where the value of the mortgage is greater than the value of the home.

Insecurity

Job insecurity and unemployment is also stopping a pick up in the property prices.

The index reveals that the average working couple buying their first home are now paying around 14.2pc of their net income in mortgage repayments.

This compares with the peak in December 2006, when payments were equivalent to 26.4pc of a couple's income.

Affordability is defined as the proportion of a first-time buyer couple's disposable income they need to meet their mortgage repayments.

It includes mortgage interest tax relief, which is up to €417 a month for those at the start of their homeloan who pay a lot of interest.

The survey is based on a mortgage which is 90pc of the value of the home and a 25-year mortgage. It is assumed the gross earnings of the couple are €82,400, and their mortgage rate is 3pc.

EBS executive Dara Deering said that that by the end of July, the proportion of net income required to meet first time buyers' repayments will have fallen further to 13.9pc.

The index says the net monthly mortgage repayment for the average first-time buyer is around €749 compared with €1,203 last July, a fall of €454 or almost 38pc.

But Ms Deering admitted: "There is no doubt that consumer concerns about job security and employment are affecting sentiment."

She added that interest rates, following seven cuts in European Central Bank rates, were now at an all-time low.

But she warned that lenders were only getting a small proportion of their funding from the ECB with most of it coming from the wholesale banking markets.

This meant that the current low interest rates were unsustainable. Already wholesale rates were rising which would push up mortgage borrower rates, even before the ECB moves to increase eurozone rates.

EBS had seen a 30pc rise in mortgage applications in the past two months as potential new buyers check out how much they can borrow.

Annette Hughes, of DKM Economic Consultants, said the index was based on a couple with a joint income of €82,370. This couple had suffered a hit of €2,874 from the two recent Budgets.

If they also suffered a 10pc pay cut they would be down €7,000 in total.

- IRISH INDEPENDENT, Charlie Weston, Personal Finance Editor