THE number of first-time buyers is falling sharply, with aspiring homeowners shackled by rising interest rates and higher property prices. Twenty and thirtysomethings who do get a foot on the ladder are using 18.3 per cent of their earnings to repay interest on their loans: this is the highest proportion since 1991, according to the latest research from the Council of Mortgage Lenders. That is happening even though close to half of all first-time buyers have also borrowed or received cash from their parents.

No wonder that members of PricedOut.org. uk – a website that provides a forum for the frustrated young professionals who feel themselves barred from home ownership – are planning a demonstration in Brighton on Sunday, the day that Gordon Brown is scheduled to visit the town. Martin Farley, 34, who rents a room in a flat near King’s Cross, Central London, for £500 a month, is a typical PricedOut member. His salary is £30,000, which means that even buying in the London suburbs is out of his reach. “The trouble with renting is you can’t make long-term plans because at any time you could be given notice to leave,” he says. “I want more stability and I feel I’ve been waiting a long time.” There were still many brownfield sites, even in London, which could be used for homes if laws forced owners to sell at reasonable prices, Martin adds. He says of PricedOut: “We are trying to bring a note of sanity to the situation. Maybe we are just throwing a snowball into the fire but we hope somebody will listen.”

The figures from the Council of Mortgage Lenders are likely to put pressure on Mr Brown to introduce new measures to make home ownership easier. On page 27 we outline the current schemes that aim to give a helping hand. But take-up has been slow. One deterrent has been the uncompetitive interest rates on the loans available through the Open Market HomeBuy arrangement. The lack of effectiveness of these schemes is forcing first-time buyers to become ever more ingenious in their attempts to secure a property of their own. There has been an increase, for example, in buying a property – but remaining at home with mum and dad.

That is the route chosen by Phillippa Glen, 23, who works for a building society, and Nicholas Fish, her boyfriend, who is setting up in a business as a landscape gardener. The couple are looking for a £110,000 house in Newark, Nottinghamshire, for which they will put down a 15 per cent deposit. But as Nicholas’s income fluctuates they will not be able to live there. Instead, they will let it to tenants while continuing to live with Nicholas’s father.

They are confident that they will be able to find tenants and so fund a £85,000 mortgage, however much Nicholas’s income varies as the business builds. They hope that within two years they will be able either to sell the house or keep it as a buy-to-let while purchasing a home of their own. Phillippa says: “We will be on the ladder and not have to worry about prices going up. We would have liked to have bought our house to live in but we are not in that position.”

Milly Garrow-Smith is taking her first step on the property ladder by climbing up a ladder with a paintbrush. Milly, 19, and her mother, Jude, have been buying houses, doing them up – while living in them – and selling them at a rate that would leave others breathless. They’re midway through renovating their fourth in three years and hope to sell it within months. Eventually they hope to have enough to buy two small flats, one of which will be Milly’s own, but think that it will be several more renovation projects before she can achieve her own home.

“My friends spend their evenings out having a good time and I’m painting or stripping wall-paper,” says Milly. “But I’m going to end up with my own place.” The mother and daughter have bought run-down houses in the pretty market town of Hexham, Northumberland – where the average price is £148,368, according to the Land Registry – that need simple renovations. Profits have come from those improvements because, though prices have risen so has the price of the next property. “There is still money to be made doing this, because most people can’t be bothered,” says Milly. “And we can do it cheaply because we do most of it ourselves.” Their first £153,000 house cost £13,000 to do up and was put back on on the market at £182,500. The latest cost £84,000, plus £10,000 spent replastering, painting and replacing laminate floors and carpets. They will not know what their profit will be until the property goes on the market in the summer.

Milly is an estate agent, so she has to avoid buying through her employers because of a potential conflict of interest. Therefore, she has to trawl around other agencies, competing with other first-time buyers for the cheapest properties with potential. “You have to be first, and that means being on the phone and checking websites every single day,” she advises. “It’s worth it if you get a property you can afford.”

PURCHASING POTENTIAL

Affordability tests are used to assess how much you can borrow: your earnings plus other commitments will be taken into account. If you want to borrow five, or six times your income, David Hollingworth, of the broker London & Country, says lenders will expect a deposit of at least 10 per cent. He suggests a little soul-searching first: “Ask yourself: will I be satisfied with just a house, or will I also need to borrow to get a car and other stuff? Paying for all that could make servicing your mortgage debt even more of a struggle.” Most lenders will now accept parents as loan guarantors. But they may have to show they can cover their own outgoings as well as those of their offspring. A Scottish Widows deal permits parents to guarantee just a portion of the mortgage. Lenders will allow up to four friends to borrow together, but they take only the two highest incomes into account. Under Britannia Building Society’s Share To Buy scheme, each of the four can borrow up to three times their salary.

Times recommends

• Second homes: credit crunch casualty or money-spinner?
• How I built my own sliding house
• Top 10 incentives for house buyers