Despite recent interest rate hikes, affordability for first-time house buyers has remained relatively stable so far this year, according to the EBS/DKM Affordability Index published yesterday.

The average first-time buyer couple is now spending 25 per cent of their net income on mortgage repayments, down slightly from 26.4 per cent last December.

Net monthly repayments on a house costing €280,000 have eased back from €1,323 in December to €1,290.

The impact of yet another interest rate increase in the first quarter of 2007 was wiped out by the doubling of mortgage interest relief and a slowdown in house price growth.

The index also showed that affordability of houses in Dublin has improved marginally for first-time buyers.

On average couples are now spending 30.4 per cent of their net income on mortgage repayments, compared to 32.5 per cent in December.

"The affordability index represents good news for first-time buyers as affordability continues to stabilise despite the upward movement of interest rates," commented Dara Deering, head of EBS mortgages. "Recent strong supply coupled with tempered demand and one additional interest rate hike has left first-time buyer affordability effectively unchanged over the past few months."

The ECB is expected to announce a further 0.25 per cent interest rate rise on June 7th but it is expected that the proportion of income required by first-time buyers to fund a mortgage will still remain below the December levels.

"With continued moderation in house prices forecast for the remainder of the year, along with strong supply, affordability for first-time buyers in the market looks set to remain close to current levels for the remainder of the year," said Ms Deering.

Annette Hughes, director at DKM Economic Consultants, said that the extent of the pick-up in the housing market now depends on a "credible reform" of the stamp duty regime by the new Government.

Garreth Murphy, editor of Irish Property Buyer magazine, which publishes the affordability index, said it is imperative that the new Government enacts measures to remove uncertainty over stamp duty before the Dáil's summer recess.