HOUSE prices and mortgage rates have fallen so far that homeowners are now handing over up to 50pc less to meet mortgage payments.

The average first-time buyer now only needs to spend 14pc of their disposable income to pay the monthly mortgage.

At the peak of the housing boom in 2006, new buyers were having to set aside more than a quarter of their monthly income to pay for a mortgage.

The collapse in house prices means that houses are now more affordable than ever.

But buyers continue to hold back in anticipation of further house price falls.

The main housing index indicates that the house prices have fallen by 24pc from their peak.

However, most commentators feel the price falls have been sharper.

Continuing house price falls will mean that by the end of the year it will cost the average first-time buyer 13pc of their income to meet mortgage repayments, EBS Building Society and DKM Economic Consultants said.

The EBS/DKM housing affordability index is a measure of the amount of after-tax income needed to meet mortgage repayments for an average first-time buyer working couple with a 90pc mortgage. The index assumes the couple have a gross income of €82,370.

EBS executive Dara Deering said the improvement in affordability was set to continue.

The slashing of interest rates by the European Central Bank has meant that first-time buyer mortgage repayments will have fallen by 44pc in the two years to the end of this year. A first-time buyer couple with a €165,000 mortgage will have seen their monthly repayments fall by €513 a month. The equivalent drop in Dublin, based on a €218,000 mortgage, will be €643 per month.

However, DKM pointed out that houses remain expensive for single buyer

THE IRISH INDEPENDENT: Charlie Weston, Personal Finance Editor