Nick Scott, 29, has been renting since graduating from university in 1996 and is desperate to buy his own home in central London. He pays £433 a month to share a house in Balham, south London, with friends. "It is so expensive that I am looking to buy within 12 months, possibly with my girlfriend," he says.
Nick works for a television production company, earning just under £30,000 a year. He has been investing an inheritance to build up a deposit: £5,000 is in Bradford & Bingley's high-interest, 90-day notice savings account. He has £3,500 in a Legal & General personal equity plan tracker, which has been converted into an ISA. Another £4,000 is invested in blue chip shares. "Is it worth pulling the money out of my high interest account and putting it in the stock market?" he asks.
When buying property it is sensible to build up a deposit so that you borrow as little as possible. As Nick hasn't got long to save he should keep all his assets in cash. Stock market investments are designed for a minimum of five years, and investing over a shorter period will leave him vulnerable to a fall in the market just when he needs to cash in the shares.
Nick should have two savings accounts: one for emergencies and the other for his deposit. A high interest account such as the Anglo Irish Bank's seven-day notice account pays 4.2 per cent on a minimum deposit of £2,000, and Nick should keep a couple of thousand pounds in this for emergencies. The rest of his cash should go in the deposit account. I suggest he sell the Legal & General tracker and blue-chip shares and add the proceeds to it.
Advice given by Patrick Connolly
Many lenders will offer flexible solutions to help Nick secure a footing on the property ladder. Based on his income, the maximum he can borrow is about £120,000, although if he buys with his girlfriend, they will be able to raise more.
His savings and inheritance are sufficient to cover his costs, and providing he is able to add to them over the next 12 months he should have a 5 per cent deposit. He should consider a fixed rate for an initial period to provide certainty. He should also think about insurance to ensure he is adequately covered in all areas.
Advice given by Mark Harris, managing director of broker Savills Private Finance, 0870 900 7762 or www.spf.co.uk