The number of first-time buyers entering the property market fell in February to the lowest level recorded for nearly two years.

Figures from the Council of Mortgage Lenders (CML) show that during the month, the number of homeloans taken out by maiden buyers dropped to 25,600 from 26,400 the month before.

A decline in loans take-up is in line with seasonal trends, but the monthly total is also down on the same period last year and is the lowest since March 2005.

In a further indication that recent interest rates hikes are beginning to have some effect, the CML added that the proportion of first-time buyers opting for fixed-rate deals hit a new high in February.

During the month, 87% of people buying property for the first time chose a fixed-rate loan, up from the previous record of 84% in January.

February’s data also showed that 70% of home movers opted to lock in a deal rather than risk further increases in the base rate.

Michael Coogan, director general of the CML said: "With the chance of at least one more interest rate rise this year, first-time buyers are taking the sensible option of taking out fixed-rate deals, and locking into the payment security they provide.

"First-time buyers are the most financially stretched group and the fact that a record number of them are choosing a fixed rate deal demonstrates their desire to plan ahead and avoid the risks interest rate rises would bring."

Ed Stansfied, property economist at Capital Economics, said the fall in numbers of first-time buyers could mean that some of the heat is now coming out of the property market.

He said: "First time buyer numbers have been gently drifting down. They do not have much of a choice, either stretch themselves with larger loans or sit out and wait for easier times. It is very tough at the moment.

"This cannot be good for the long-term outlook for the market. It is another argument for expecting the market to get softer as the year goes on. The outlook for 2008 will be pretty soft."