First-time buyers should start preparing for a rise in the Bank of England Base Rate as UK property prices start to approach the 2007 peak, Nationwide has warned.
The building society's latest house price index said UK house prices at the beginning of the year were 8.8% higher than the start of 2013, now just 4% below the market's peak in 2007.
The typical property is now worth £176,491, with house values increasing by 0.7% between December and January.
The lender said the number of first-time buyers in Q3 2013 hit 73,700, up 32% compared with the same period in 2012. However the typical home purchased by these borrowers costs 4.6 times average earnings, well above the 20 year average of 3.6.
On the back of these figures Robert Gardner, Nationwide's chief economist, advised borrowers who have taken out a mortgage for the first time in the last five years to prepare for a rise in interest rates.
"More than a million first-time buyers have entered the market since the Bank Rate was cut to a 300 year low in early 2009, many of whom have yet to experience a hike in interest rates," he said. "While we do not expect interest rates to rise until mid-2015, borrowers should be prepared for the prospect of interest rates increasing back towards more normal levels."
Gardner said there was less scope for borrowers to reduce monthly payments due to the collapse of the interest-only market and borrowers were now extending their mortgage terms more frequently.
"There is a trend toward borrowers lengthening the term of their mortgage, with 52% of mortgages currently over 25 years, up from 40% in 2007. This may, in part be to lower their monthly repayments, though the shift may also reflect that people are both living and working for longer."
Separate data from the Land Registry for December showed London was behind much of the country's increases with property prices in the capital rising 2.6% in the last month alone.
Alex Gosling, director of online estate agent House Simple, said buyers in London face being priced out of the market.
"Thirteen consecutive months of house price growth paints a picture of a housing market that has returned to health," he said.
"This may not be good news for first-time buyers with prices rising across the UK not just in London, but it's encouraging that strong activity suggests rising prices haven't put off buyers, even at the bottom of the market.
"However, in London it's the same old story. Price growth is steaming ahead, first-time buyers are being priced out, and with demand high and stock levels low there's no sign that this picture will change in the short-term.
"The worry is that first-time buyers in the capital are being panicked into buying for fear that prices will run away from them."
