'If our loan was on income we'd be £20,000 short'

Desperate buyers are taking risks, says Helen Monks. But there are safer ways to buy that first home

Reports that first-time buyers are borrowing up to ten times their salaries to land a home of their own are shocking to all except would-be first-time buyers. Tired of spending money on rent and desperate to get a toe on the property ladder, many first-timers take risks to secure big enough mortgages.

Reports that first-time buyers are borrowing up to ten times their salaries to land a home of their own are shocking to all except would-be first-time buyers. Tired of spending money on rent and desperate to get a toe on the property ladder, many first-timers take risks to secure big enough mortgages.

Only a few are managing to persuade lenders to offer tentimes their salary, compared with the standard three and half times, and in some cases the few may have exaggerated their incomes on their applications.

But with Halifax's latest figures showing the average price for a first home is more than £100,000, many new owners are beyond normal income multiples.

The Council of Mortgage Lenders figures show the number of first-time buyers has dropped to the lowest since records began in 1974, just 29 per cent of all buyers, compared with 38 per cent in 2002.

But those who manage to get loans based on high income multiples are playing a dangerous game. The Bank of England raised base rate to 4 per cent this month, and pundits expect rates to creep up.

But several options are available to first-timers struggling for large mortgages. Many lenders, including Nationwide and Intelligent Finance, look at whether you can actually afford the mortgage. A spokesperson says: "Income multiples are a crude way of assessing affordability; there is no inherent merit in them. We use net monthly income and expenditure analysis and offer a maximum loan of 95 per cent."

For friends, clubbing together deposits and incomes to buy a property jointly can be sensible. The maximum number of people legally allowed on a property deed is four. But only a few lenders will lend on the incomes of more than two people.

Couples can expect 2.75 times their combined incomes, but group mortgage applications can expect four times the highest income plus once each of the other incomes. Skipton Building Society (www. skipton.co.uk) will lend twice the income of four borrowers.

But beware the risks in buying with friends: everyone on the mortgage deed is jointly liable to make the payments, so if arrears build all involved will be tainted with a bad payment record. A legal agreement is vital.

Parents or other relatives could also act as guarantor on loans. The Scottish Widows Bank ask only for a top-up guarantee of the difference between what the applicant could normally borrow and what they actually need to buy the property.

Another option, offered by the Woolwich among others, is "family offset". This keeps parents' savings in the same account as the borrower's mortgage. There is no access to the savings, because they offset the level of debt, reducing interest and monthly payments.

And Scottish Widows offers 100 per cent mortgage facilities to young graduates and professionals. HSBC offers 100 per cent lending to graduates at four times salary, and The MarketPlace at Bradford & Bingley is targeting first-timers with a two-year tracker mortgage for up to 102 per cent of the property's value.

Interest is charged at bank base rate plus 0.45 per cent for two years, giving a present rate of 4.45 per cent.

SARAH LUXFORD says: "It's really tough; if we had gone for a lender who worked out how much we could borrow solely on our income, we'd have had a £20,000 shortfall."

Ms Luxford, 22, left, and partner Chris Elliott, 24, are first-time buyers. The accounts assistant and payroll clerk tried but failed to secure loans from lenders who use income multiples to calculate how much they will lend.

They now have a mortgage with Intelligent Finance, based on affordability. It works out at nearly four times their combined income.

The mortgage will cover 95 per cent of the price of their two bed-roomed terraced house in Stanground, near Peterborough, which the couple hope to have moved into by next month.

FACT FILE OVERSIZED MORTGAGES

* Look at guarantor mortgages with your parents or other relatives.

* Consider lenders who work out how much you can borrow based on affordability, not income multiples.

* Think about clubbing together with friends to buy.

* Go for lenders specialising in graduate or professional mortgages.

* Convince your parents to help you with a family offset mortgage.