NATALIE LINTON and Anna Mitchell are impatient to become homeowners. The two law students have secured jobs with a City legal firm that start in September and expect to earn £35,000 each. The friends plan to look for a two-bedroom apartment in Islington, North London, but are worried that they may be priced out of the capital before they can afford to buy.

They will need to find £300,000 to £350,000 to buy a two-bedroom flat in Islington, where the average property price is £407,934, up 17 per cent in a year. They have savings but only enough to meet legal fees and stamp duty, which will add up to £15,000. Natalie says: “The dilemma is whether to get on the property ladder as soon as possible or to take advantage of the interest rates at the moment and save a 5 or 10 per cent deposit before buying. It would take a couple of years to save enough, as we would be paying rent of about £650 a month each.”

The answer, they believe, is to buy as soon as possible, with a 100 per cent mortgage of up to five times their joint salaries. Such income multiples might make homebuyers from previous generations sweat, but such is the competition to get on the ladder that many first-time buyers are forced to overstretch. Figures from the Council of Mortgage Lenders this week showed that first-time buyers are having to commit an average of 18.3 per cent of their gross income to mortgage interest, the highest level since 1991. Rising interest rates will only make matters worse.

Natalie and Anna have watched various friends buy together and have seen the value of those properties rise. Natalie says: “Anna and I had talked about renting together but my mother suggested we buy. Many of the people we know have bought together, and some of them were quite unlikely pairings, but it has worked out well. In one case, two of our friends who own together are thinking of buying a second property.” Natalie says the consensus among friends and family is that they should get on the property ladder as soon as they can, however they can.

Market observers, such as the property database Hometrack, are predicting a house price slowdown this year, but the spectre of falling prices does not trouble Natalie: she believes that prices will continue to rise until the 2012 Olympics. But even with this assurance and a brave approach to debt, they may not be able to buy this year. James Cotton, of the mortgage broker London & Country, says that lenders require borrowers to be out of their probationary period of employment, which can last for three or more months. “There are one or two lenders who would be willing to lend this kind of money by using affordability criteria. But just because you can borrow the money, doesn’t mean you should: each will be taking home about £2,000 a month after tax, and on a loan of £350,000 at 5.5 per cent that would mean repayments of £2,200, which is a fair chunk of their combined salaries.”

Overstretching to afford a property brings other expenses, such as higher than average interest rates. Cotton says: “Such a property would also attract high council tax and other bills and they would likely need life insurance, all of which would have to be budgeted for.” Natalie and Anna would be wise to wait some time after starting their new jobs to make sure that they can afford the repayments.

Whether to wait to save more money is a dilemma that continues to bother potential first-time buyers. Mr Cotton says “Whether they should buy now or save for later is a question for the buyer because without knowing where the market is headed it is impossible to say.”

But David Bexon, of SmartNewHomes.com, which recently launched SmartSharedHomes.com, says that investing in a flat in Islington, near their current homes, could prove a wise investment. “They would be buying a higher-end property, which could appreciate more quickly than a cheaper one. In that way, it is an investment rather than just a purchase based on need. And because they are familiar with the area they are better placed to know about infrastructure and the local community.”

But without equity in the form of a deposit, Natalie and Anna put themselves at risk of having to stay in the property even if they want to move on. Natalie says: “The problem for us is that once you are paying off a house in London, you have a big commitment, which might make it hard to work or travel overseas.”

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