THE worsening economic gloom has put two thirds of first time homebuyers off going through with a purchase, according to new figures published today.

At the start of 2008, 14 per cent of non-homeowners were considering investing in their first property. Now just over a third of those are planning to proceed with their purchase – 64 per cent have put their property search on hold, according to the research by Abbey Mortgages.

The reasons given for the delay overwhelmingly relate to economic uncertainly. Around 74 per cent of all first time buyers (FTB) claim that speculation about house prices and has dampened their enthusiasm. Of these, 69 per cent fear that house prices will fall, whilst 67 per cent feel that their finances are already too stretched. Others are worried they might lose their job.

One in five mortgage holders are worried about meeting their repayments in the next 12 months, according to the Financial Services Authority.

The news comes as the availability of 100 per cent-plus mortgages declines. Mortgage lenders Northern Rock, Alliance & Leicester, Birmingham Midshires and Abbey have all now begun to require borrowers to supply the deposit on a new homes, making it more difficult for FTBs to get onto the housing ladder.

According to Abbey, FTBs in Wales and the South West have been affected the most of any part of the country. In these areas, 15 per cent were planning to buy their first property at the start of 2008 but a massive 87 per cent of this group have now decided to delay.

Young FTBs were most likely to be delaying. Of the under 25s, 11 per cent were considering buying their first home at the beginning of the year but now just two per cent will be going ahead with the purchase.

Nici Audhlam-Gardiner, Director of Mortgages at Abbey, said: “We know how difficult it is for first time buyers to get on the property ladder, and this is exacerbated by current market uncertainty.

“As has always been the case, we recommend that homebuyers give serious thought to affordability when purchasing a home and not overstretch themselves.”

House prices continued their downward trend in February for the fourth month running according to Nationwide, but it insisted that recession was still a "remote risk" for the UK economy.

Nationwide said that the 0.5 per cent February fall meant house price inflation was 2.7 per cent, the lowest annual growth rate since November 2005. Eight months ago it was running at 11.1% and in January it was 4.2 per cent.

It is the first time since 2000 that house prices have fallen for four months in a row.