A new report has suggested that despite fears of negative equity for current homeowners, the falling prices will benefit first time buyers who have, until recently been priced out of the market.

The analysts Hometrack say a 10% fall in prices will enable a fifth of those currently priced out of the market to buy a two- or three-bedroom home.

Their report says 28% of young people in work in the UK are unable to buy even their cheapest local properties. The situation is worst in London, followed by south-west England.

The most affordable part of the country for home buyers is the North East where only 17% of young households are priced out of home ownership.

However, while house prices are falling, access to the property market is being increasingly limited by the costs and more restrictive terms of a substantially reduced supply of mortgage finance.

The cost of repaying a mortgage rose by 12% last year, which meant in turn that the cost of paying back a home loan rose to 34.5% of average incomes for first-time buyers.

Following the disasters at Northern Rock another mortgage bank is starting to look shaky. In the first few months of the year Bradford and Bingley has managed to actually lose money, which is very unusual for a mortgage bank.

Because of this remarkable poor performance it is having to shore up its finances to the tune of £400m.

But it is the lender’s bad debt figures, located towards the back of its 11-page announcement, which are just as worrying. The slowdown in the economy, and higher household bills, have affected quickly the ability of home owners to repay their mortgages.

By the end of April, 8,333 of the Bradford and Bingley’s borrowers, 2.16% of all the bank’s mortgage customers were in trouble, with arrears of three months or more, or in the throes of being repossessed.

That was 35% more than at the end of last December when only 1.63% of borrowers 6,170 were in that position. And that was already far worse than the industry average, which stood at just 1.1% in the second half of last year.