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Money saving expert Martin Lewis has warned prospective homeowners over the new government 5% deposit mortgage scheme, which was introduced this week.
The new government mortgage scheme, which began on Monday (April 19), means more 95% loan-to-value (5% deposit) mortgages.
Under the mortgage guarantee scheme (MGS), the government covers a portion of the mortgage risk on properties up to £600,000 (excluding new-builds).
This means lenders can offer more up to 95% loan-to-value (LTV) mortgages.
The LTV is the proportion of a property's value you borrow – so 95% means first-time buyers only need a 5% deposit.
However, in his moneysavingexpert.com blog, Martin warned people that these mortgages "aren't special".
He wrote: "Seven major lenders are taking part, but DON'T think these mortgages are special.
"Big names such as Barclays, HSBC, Lloyds, NatWest, Halifax and Santander are offering loans under the MGS for first-time buyers and home movers, but there is also now a growing number of 95% mortgages that aren't part of the scheme."
Martin said that many lenders offering MGS mortgages are "hyping it up", however he said people shouldn't favour a mortgage just because it's part of the scheme.
He added: "The MGS offers lenders surety so they can offer more mortgages, but they aren't any better for borrowers – so pick solely based on which offers the best terms."
The money expert also advised people to push for bigger deposit if they can.
This is because he said that 5% mortgages "far more expensive" than if you can afford a bigger deposit.
He said: "As a rough rule, for each 5%-point extra deposit you have, mortgages get cheaper, until you've a 40% deposit (60% LTV)."
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Martin also reminded people that anyone aged 18-39 can open a top Lifetime ISA and get a 25% boost, worth up to £1,000 a year on top of savings made towards a first home of up to £450,000, once the LISA's been open a year.
The warning from Martin comes after a homeowner said he's only recently realised he's paid "too much" council tax for 30 years thanks to Martin's TV show.
Hull resident David Parker, 73, believes the council has wrongly claimed thousands of pounds in council tax from himself and his neighbours after claiming they are all in the wrong council tax band for 30 years.
He said he only realised after Martin advised his viewers to check that they were in the correct council tax bands.
- Martin Lewis
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