Buyers borrow to raise deposit.

YOUNG people planning to take advantage of the ailing housing market are taking out loans to afford the deposit on properties, according to a new survey.

More than one-in-10 18-to-34-year-olds are considering buying property for the first time in the next year.

Of those, 16% are considering taking out a loan to cover the cost of the downpayment they need, according to a study by moneysupermarket.com.

Only a quarter of the prospective first-time buyers surveyed already have the deposit saved, with recent figures from the Council of Mortgage lenders showing that first-time buyers are putting down an average of pounds 32,000 each.

Out of those who have not yet saved enough for their deposit, 29% are planning to rent until they have saved enough money and 14% are hanging their hopes on property prices dropping further.

Around 6% of first-time buyers are banking on 100% mortgage deals returning to the market.

First-time buyers have been hard hit by the current problems in the mortgage sector, which has seen the number of loans available to people with only a 10% deposit shrink to 121, down from 1,152 in November 2007.

Louise Cuming, head of mortgages at moneysupermarket.com, said: "Taking out a loan to pay for a mortgage deposit is a dangerous move.

"It must be avoided even if it means you have to delay buying your first home while you save.

"Anyone who takes a loan is effectively taking out a 100% mortgage through the back door.

"Not only will the mortgage lender decline the application if it discovers this is the source of the deposit, but it is also a huge risk to the borrower - your monthly outgoings will be higher, which means there is a greater chance of you finding yourself unable to keep up with repayments."

She added that the need for such high deposits was pricing many people out of the market and called for lenders to concentrate more on assessing the affordability of a mortgage on a case by case basis.

Research released by the CML last week showed that a record 80% of first-time buyers under 30 are thought to be receiving money from their parents to use as a deposit, with first-time buyers typically putting down 25% of a property's value.

But despite the huge deposits that first-time buyers are continuing to have to raise, the number of people buying their first home with a mortgage rose for the fourth month in a row during May to 14,000 - the highest number since October last year.