A growing number of young working people are unable to take their first step onto the property ladder in the areas they live in, new research claims today.

The Joseph Rowntree Foundation has found that 1.25 million young households in Britain earn too much for government assistance but not enough to take out a mortgage on even the cheapest homes.

One in three of households living in London and the South are caught in this 'intermediate housing market'. Just over a fifth of households aged under-40 living elsewhere in the country are also affected.

The least affordable areas have been identified as Weymouth & Portland and Bournemouth in Dorset, South Buckinghamshire, Carrick in Cornwall and the London Boroughs of Kensington & Chelsea and Harrow.

Professor Steve Wilcox of the University of York, who carried out the study, said there is a 'yawning gap' in the housing market that is much bigger than had been previously recognised by the government or housing providers.

"At the very least the figures justify some new and creative thinking on ways that the current range of intermediate housing products could be expanded to appeal to the growing number of young, working households who simply cannot afford local house prices," he said.

Lord Richard Best, director of the Joseph Rowntree Foundation, added: "If large numbers of households are not to miss out on the benefits of home ownership, then much greater efforts - and probably much more public money - will be needed to give them a break."

Yvette Cooper, the minister for housing and planning, admitted that house building over the last 30 years had been too slow and that combined with changing social trends, demand has outstripped supply for one and two bedroom houses.