FIRST home buyers are being priced out of the market by interest rate rises and skyrocketing utility prices.

Finance approvals to first home buyers have fallen to six-year lows and made up 15.5 per cent of the total loans market in August, according to Australian Bureau of Statistics data released yesterday.

CommSec economist Savanth Sebastian said the numbers were well below a May 2009 peak of 28.5 per cent market share.

"The hangover effect from the first home buyer grant coupled with rate hikes mean people are finding it more difficult to buy," he said.

"The rise in utility prices is also a factor, when you are looking at the household budget there isn't really much room to move."

The news comes as more budget pain is forecast for first home buyers. Westpac chief executive Gail Kelly warned there will be more rate rises.

She said banks' borrowing costs had increased because of the global financial crisis.

"Over time, rates are going to go up," she said.

"We can look into our costs of funding and we can look into our profile of the costs over the next 18 months and we can see that those costs of money for the next 18 months are going up."

JPP buyer's advocate Catherine Cashmore said frustrated first home buyers made up the bulk of her business.

"Finding a two-bedroom apartment in the city for under $500,000 for first home buyers is very difficult now," she said. "They will get outbid at auction by mum and dad investors who are buying a second home."

Ms Cashmore said she encouraged first home buyers to compromise while still finding a good investment.

"They don't want to live in the suburbs, they want to live in the city, close to all the shopping strips and public transport," she said.