The problem: Can I save enough to buy my first home?

Cathy Green, 26, faces a challenge familiar to many young professionals.

She wants to get on the property ladder in the next year but fears that rising interest rates and sky-high prices will pull the bottom rung out of reach.

“My parents have offered to help out with the deposit, and I have been told I can get an interest-only mortgage of 120,000 at a fixed rate for three or five years,” she says. “With this in mind, I’m looking at properties up to 170,000 in south-east London.”

Cathy earns around 25,000 a year as a trainee clinical psychologist, and is in the first year of a three-year course at King’s College London. For now, she is fortunate to be able to rent a room for 300 a month in a flat owned by her father in Chelsea.

However, she has debts to deal with. On top of 10,000 in student loans, she owes 4,000 on an MBNA credit card, paying interest at an annual percentage rate (APR) of 15.9 per cent.

“I am not actively using a credit card at the moment,” says Cathy. “I put 100 a month towards paying off this debt, although it’s a struggle.”

On the plus side, she has 5,000 in a Nationwide Building Society instant access cash individual savings account (ISA), earning 5.1 per cent.

Another 5,000 was invested on her behalf 10 years ago and is split between shares in Boots, ITV, the Bankers Investment Trust and the Merchant Trust. She has no idea what this investment is worth.

Cathy pays 6 per cent of her wages into the NHS final salary pension scheme.

The cure: Cut out luxuries and start putting cash aside

While Cathy is lucky to get parental help to buy her first home, our panel of independent financial advisers (IFAs) agree that she still needs to work out a budget - and stick to it - to save as much as possible towards the property purchase.

“With a monthly income after tax of around 1,500 and regular outgoings of about 600, she is spending about 900 on living costs - and can afford to save more,” says Keith Churchouse of IFA Churchouse Financial Planning.

Property

A 50,000 deposit should give Cathy access to some of the best mortgage deals, says Ben Yearsley of IFA Hargreaves Lansdown, and mean that she avoids the higher lending charge levied by some banks and building societies to protect themselves if borrowers have only a small amount of equity in a property.

As she’s on a tight budget, a fixed-rate mortgage, giving her set monthly repayments, is a good option. At the moment, a loan of 120,000 taken out over 25 years at 6 per cent would cost about 600 a month on an interest-only basis.

But Mr Yearsley warns that with this type of mortgage, she will not be paying off any of the capital, and urges her to switch to a repayment deal once she qualifies as a psychologist and her income has increased.

Sadly, she may find it tricky to find a one-bedroom flat in London for 170,000 unless she is prepared to be flexible about the location and the standard of property she is seeking.

Debt

If possible, Cathy should put more than 100 a month towards paying off her credit card debt, says Mr Yearsley, who also urges her to cut up her credit card.

Frances Goldspink of IFA Lucas Fettes suggests she transfer her balance on to a new card offering an interest-free deal. With Barclaycard, for example, she wouldn’t have to pay interest on debt transferred from another card until July 2008.

Since the interest rate on student loans is linked to inflation - and stands at only 2.4 per cent - Cathy should not worry about clearing this debt immediately, Mr Churchouse adds.

Savings/investments

Cathy already has the “bare bones of an investment portfolio” with her investment trusts and shares, Ms Goldspink notes. However, she may be better off selling her shares, using this money to pay off her credit card debt and then putting the remainder into an ISA.

“The only bright spark in the investments she holds are the Boots shares, which have performed well recently thanks to several takeover offers,” says Mr Yearsley.

“But if you are going to hold a portfolio of shares, you really need to have 15 to 20 different companies to get a reasonable spread.”

Retirement

Cathy is fortunate to have access to the NHS final salary pension plan.

“This is a great pension to have,” Mr Churchouse says. “She should review how much she contributes in the future when her financial situation is more settled - to ensure that she is making the most of it.”

If you would like a makeover, write to Sam Dunn at The Independent on Sunday, Independent House, 191 Marsh Wall, London E14 9RS, or email s.dunn@independent.co.uk

The problem: Can I save enough to buy my first home?

Cathy Green, 26, faces a challenge familiar to many young professionals.

She wants to get on the property ladder in the next year but fears that rising interest rates and sky-high prices will pull the bottom rung out of reach.

“My parents have offered to help out with the deposit, and I have been told I can get an interest-only mortgage of 120,000 at a fixed rate for three or five years,” she says. “With this in mind, I’m looking at properties up to 170,000 in south-east London.”

Cathy earns around 25,000 a year as a trainee clinical psychologist, and is in the first year of a three-year course at King’s College London. For now, she is fortunate to be able to rent a room for 300 a month in a flat owned by her father in Chelsea.

However, she has debts to deal with. On top of 10,000 in student loans, she owes 4,000 on an MBNA credit card, paying interest at an annual percentage rate (APR) of 15.9 per cent.

“I am not actively using a credit card at the moment,” says Cathy. “I put 100 a month towards paying off this debt, although it’s a struggle.”

On the plus side, she has 5,000 in a Nationwide Building Society instant access cash individual savings account (ISA), earning 5.1 per cent.

Another 5,000 was invested on her behalf 10 years ago and is split between shares in Boots, ITV, the Bankers Investment Trust and the Merchant Trust. She has no idea what this investment is worth.

Cathy pays 6 per cent of her wages into the NHS final salary pension scheme.

The cure: Cut out luxuries and start putting cash aside

While Cathy is lucky to get parental help to buy her first home, our panel of independent financial advisers (IFAs) agree that she still needs to work out a budget - and stick to it - to save as much as possible towards the property purchase.

“With a monthly income after tax of around 1,500 and regular outgoings of about 600, she is spending about 900 on living costs - and can afford to save more,” says Keith Churchouse of IFA Churchouse Financial Planning.

Property

A 50,000 deposit should give Cathy access to some of the best mortgage deals, says Ben Yearsley of IFA Hargreaves Lansdown, and mean that she avoids the higher lending charge levied by some banks and building societies to protect themselves if borrowers have only a small amount of equity in a property.

As she’s on a tight budget, a fixed-rate mortgage, giving her set monthly repayments, is a good option. At the moment, a loan of 120,000 taken out over 25 years at 6 per cent would cost about 600 a month on an interest-only basis.

But Mr Yearsley warns that with this type of mortgage, she will not be paying off any of the capital, and urges her to switch to a repayment deal once she qualifies as a psychologist and her income has increased.

Sadly, she may find it tricky to find a one-bedroom flat in London for 170,000 unless she is prepared to be flexible about the location and the standard of property she is seeking.

Debt

If possible, Cathy should put more than 100 a month towards paying off her credit card debt, says Mr Yearsley, who also urges her to cut up her credit card.

Frances Goldspink of IFA Lucas Fettes suggests she transfer her balance on to a new card offering an interest-free deal. With Barclaycard, for example, she wouldn’t have to pay interest on debt transferred from another card until July 2008.

Since the interest rate on student loans is linked to inflation - and stands at only 2.4 per cent - Cathy should not worry about clearing this debt immediately, Mr Churchouse adds.

Savings/investments

Cathy already has the “bare bones of an investment portfolio” with her investment trusts and shares, Ms Goldspink notes. However, she may be better off selling her shares, using this money to pay off her credit card debt and then putting the remainder into an ISA.

“The only bright spark in the investments she holds are the Boots shares, which have performed well recently thanks to several takeover offers,” says Mr Yearsley.

“But if you are going to hold a portfolio of shares, you really need to have 15 to 20 different companies to get a reasonable spread.”

Retirement

Cathy is fortunate to have access to the NHS final salary pension plan.

“This is a great pension to have,” Mr Churchouse says. “She should review how much she contributes in the future when her financial situation is more settled - to ensure that she is making the most of it.”

If you would like a makeover, write to Sam Dunn at The Independent on Sunday, Independent House, 191 Marsh Wall, London E14 9RS, or email s.dunn@independent.co.uk

The problem: Can I save enough to buy my first home?

Cathy Green, 26, faces a challenge familiar to many young professionals.

She wants to get on the property ladder in the next year but fears that rising interest rates and sky-high prices will pull the bottom rung out of reach.

“My parents have offered to help out with the deposit, and I have been told I can get an interest-only mortgage of 120,000 at a fixed rate for three or five years,” she says. “With this in mind, I’m looking at properties up to 170,000 in south-east London.”

Cathy earns around 25,000 a year as a trainee clinical psychologist, and is in the first year of a three-year course at King’s College London. For now, she is fortunate to be able to rent a room for 300 a month in a flat owned by her father in Chelsea.

However, she has debts to deal with. On top of 10,000 in student loans, she owes 4,000 on an MBNA credit card, paying interest at an annual percentage rate (APR) of 15.9 per cent.

“I am not actively using a credit card at the moment,” says Cathy. “I put 100 a month towards paying off this debt, although it’s a struggle.”

On the plus side, she has 5,000 in a Nationwide Building Society instant access cash individual savings account (ISA), earning 5.1 per cent.

Another 5,000 was invested on her behalf 10 years ago and is split between shares in Boots, ITV, the Bankers Investment Trust and the Merchant Trust. She has no idea what this investment is worth.

Cathy pays 6 per cent of her wages into the NHS final salary pension scheme.

The cure: Cut out luxuries and start putting cash aside

While Cathy is lucky to get parental help to buy her first home, our panel of independent financial advisers (IFAs) agree that she still needs to work out a budget - and stick to it - to save as much as possible towards the property purchase.

“With a monthly income after tax of around 1,500 and regular outgoings of about 600, she is spending about 900 on living costs - and can afford to save more,” says Keith Churchouse of IFA Churchouse Financial Planning.

Property

A 50,000 deposit should give Cathy access to some of the best mortgage deals, says Ben Yearsley of IFA Hargreaves Lansdown, and mean that she avoids the higher lending charge levied by some banks and building societies to protect themselves if borrowers have only a small amount of equity in a property.

As she’s on a tight budget, a fixed-rate mortgage, giving her set monthly repayments, is a good option. At the moment, a loan of 120,000 taken out over 25 years at 6 per cent would cost about 600 a month on an interest-only basis.

But Mr Yearsley warns that with this type of mortgage, she will not be paying off any of the capital, and urges her to switch to a repayment deal once she qualifies as a psychologist and her income has increased.

Sadly, she may find it tricky to find a one-bedroom flat in London for 170,000 unless she is prepared to be flexible about the location and the standard of property she is seeking.

Debt

If possible, Cathy should put more than 100 a month towards paying off her credit card debt, says Mr Yearsley, who also urges her to cut up her credit card.

Frances Goldspink of IFA Lucas Fettes suggests she transfer her balance on to a new card offering an interest-free deal. With Barclaycard, for example, she wouldn’t have to pay interest on debt transferred from another card until July 2008.

Since the interest rate on student loans is linked to inflation - and stands at only 2.4 per cent - Cathy should not worry about clearing this debt immediately, Mr Churchouse adds.

Savings/investments

Cathy already has the “bare bones of an investment portfolio” with her investment trusts and shares, Ms Goldspink notes. However, she may be better off selling her shares, using this money to pay off her credit card debt and then putting the remainder into an ISA.

“The only bright spark in the investments she holds are the Boots shares, which have performed well recently thanks to several takeover offers,” says Mr Yearsley.

“But if you are going to hold a portfolio of shares, you really need to have 15 to 20 different companies to get a reasonable spread.”

Retirement

Cathy is fortunate to have access to the NHS final salary pension plan.

“This is a great pension to have,” Mr Churchouse says. “She should review how much she contributes in the future when her financial situation is more settled - to ensure that she is making the most of it.”

If you would like a makeover, write to Sam Dunn at The Independent on Sunday, Independent House, 191 Marsh Wall, London E14 9RS, or email s.dunn@independent.co.uk