First-time house prices jump £16,000 in a year

The asking price of a first-time buyer home jumped more than £1,300 every month over the past year, new research showed.

Fierce competition between would-be buyers and a growing army of buy-to-let landlords has created a "vicious cycle" of soaring prices at the entry point to the market, according to Rightmove.

The property portal said the price of homes suitable for first-time buyers (two bedrooms or fewer) has jumped 9.6%, or £16,105, over the last 12 months. This is almost double the overall house price rise of 5.6%.

The situation is being further hampered by a supply shortage, with the number of suitable homes being put on the market 8% lower than a year ago.

Rightmove director Miles Shipside said: "There are signs of a slowing pace of price rises in some sectors of the market, with the overall October rise the lowest we've recorded at this time of year for five years.

"We still have another national average record however, as prices continue their upward trend. This is mainly being fuelled by the heady price rises of typical first-time-buyer homes.

"A near 10% price surge in this category in the last year proves that despite tighter lending criteria, some first-time buyers can still afford the higher prices being asked for by sellers in this sector.

"It is also symptomatic of a shortage of properties coming to market with two bedrooms or fewer, combined with demand from both first-time buyers and landlords investing in reaction to the huge rental demand for smaller properties."