The threat of a sustained downturn in the housing market grew yesterday after a leading investment bank forecast that property prices would fall for the next two years. The Times

Goldman Sachs said it expected house prices to fall by 5% this year and a further 2% in 2009. The bank had originally predicted a decline of 3% in 2008 and no further change the year after, but became more pessimistic after economic warning signs.

Meanwhile first-time home buyers found life more difficult in December as higher mortgages claimed 20.7 per cent of the average income, compared with 17.9% a year ago. According to the Council of Mortgage Lenders, the five rises in interest rates from August 2006 to July 2007 meant that borrowers were paying 3.38 times a typical salary for their mortgage in December, up from 3.34 times a year earlier.