First-time buyers are being squeezed out of the mortgage market as a result of rising interest rates, new figures from the Irish Bankers' Federation (IBF) show.

First-time buyers now account for just under 21 per cent of the value of the mortgage market, down from a 22.4 per cent share of the market last year. And the number of mortgages taken out fell from 10,062 new mortgages in the third quarter of 2005 to 9,884 in the same quarter this year.

The smallest increases in the average loan sizes also occurred among first-time buyers, where the average mortgages increased by just 1.8 per cent over the period to €231,514. Despite this, the value of loans advanced to first-time buyers was almost €2.3 billion, up from €2.1 billion in the third quarter of 2005.

"Affordability for that particular segment of the market is obviously tightening as a result of the cycle of interest rate increases," according to IBF chief executive Pat Farrell. Each quarter-point rise in interest rates adds €35 to an average first-time buyer's monthly repayment, according to the IBF figures.

The IBF and PricewaterhouseCoopers' quarterly analysis of the mortgage market shows that 54,623 new mortgages were taken out in the third quarter of 2006, compared to 53,543 in the same period last year.

Overall, new mortgage lending in the third quarter of the year amounted to almost €11 billion, which was a 16.9 per cent increase on the same quarter in 2005. This figure is down from a 20.6 per cent increase in the value of the market recorded between the second quarter of 2005 and the second quarter of this year.

The latest Permanent TSB/ Economic and Social Research Institute house price index, published on Monday, showed a fifth consecutive monthly slowdown in the rate of growth.