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First-time buyers urged 'be wary of mortgage deal'

Tuesday, 18 January 2011 4:01 PM

New mortgage schemes claiming to grant first-time buyers access to the UK property market could be a "genuine alternative" for some people, but should only be used where "absolutely necessary", experts have warned.

As reported last week, the product allows the parents of potential buyers to apply for a Hitachi Capital unsecured loan of up to £50,000 to help pay off the deposit on their children's Barratt home.

Timothy Lambert, head of consulting at independent property investment advisor Ducalian, told AboutProperty that the scheme would be "likely to prove popular with buyers", but that with parents it "may be a different matter".

"At the end of the day, someone has to pay the loan," he explained, before urging both first-time home buyers and their parents to approach such offers with a cautious mindset.

Lambert added: "Buyers still need to save and must learn from what has happened these last four years; property is not a licence to print money in all circumstances."

He went on to point out that any increase in interest rates could push mortgage payments up and result in many people finding they had "bitten off more than they could chew" in the race to own a property.

Under the Hitachi Capital loan agreement, the average buyer will only need to raise a five per cent deposit before purchasing an 80 per cent mortgage from one of many high street lenders.

The remaining 15 per cent of the Barratt home's purchase price can then be covered by an unsecured loan from the company to the buyers' parents or legal guardian.

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