First time buyers can have a 100% mortgage from Lloyds Bank but requires parents to make a 10% savings account deposit.
Lloyds Bank has launched a new product offering first time buyers 100% mortgage although the loan must be backed by a family member making a 10% deposit to a savings account.
The ‘Lend a Hand’ deal allows you to borrow up to £500,000 for a new home with no need for a deposit on a three year fixed rate 2.99% mortgage.
A family member must agree to secure the loan with a deposit equal to 10% of the loan or as much as £50,000 in a Lloyds savings account earning 2.5% per year fixed for three years.
After the financial crisis 100% mortgages were withdrawn from the market due to the risks and this deal is not available to home movers, remortgage buyers or buy-to-let investors.
£30bn commitment to home buyers
Vim Maru group director of retail at Lloyds Banking Group said, the deal is part of a £30 billion commitment from Lloyds Bank to help first time buyers by 2020
This is as part of our pledge to help people and communities across Britain prosper and ‘Lend a Hand’ is one of the ways we will do this, says Mr Maru.
The main risk of these types of products is that homeowners can be exposed to negative equity where the value of a home is worth less than the outstanding mortgage.
Barclays is the only other bank offering a 100% Loan to Value (LTV) with a three year fixed rate at 3.0% and saving deposit of 2.25% over this period.
Mr Maru said, this market-leading product is helping to address the biggest challenges first-time buyers face getting on to the property ladder, while rewarding loyal customers in a low rate environment.
Children still have a similar ambition to their parents to own their own home, and ‘Lend a Hand’ helps parents to invest in their children’s future and get the best return on their cash.
There are many competitive offers from lenders and remortgage buyers currently on a standard variable rate can switch to a new mortgage deal to help them to reduce the cost of monthly repayments.
For home movers wanting to trade up, having equity for their next purchase means they will receive a preferential mortgage rate making their purchased more affordable.
How the Lend a Hand mortgage works
Research from Lloyds shows that the goal for people aged 18 to 35 is to buy their own home and half said saving for the deposit is the biggest barrier.
Of the parents interviewed, 41% said they would like to help their children with a deposit but are worried about money for their own future.
The average deposit for first time buyers is £33,211 and this increases to £110,182 in London while parents have average savings of £43,416.
Higher property values for older family members would allow the equity release buyer to access wealth using a lifetime mortgage to give to a child or grandchild the deposit on their first home.
The ‘Lend a Hand’ deal allows first time buyers to buy homes in England and Wales valued up to £500,000 with a family member willing to deposit 10% in a savings account for three years.
During the term if mortgage payments are missed it can be taken from the deposit and when paid to the lender the family member will be refunded with interest at the end of the 3 years.
What are your next steps?
Call our LCM mortgage brokers for advice if you are a first time buyer, want to remortgage your existing home for the best mortgage deal, moving home or a buy-to-let investor.
For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your property for home and garden improvements or holidays of a lifetime.
Start with a free mortgage quote or call us and we can take your details. Learn more by using the property value tracker chart, mortgage costs calculator and equity release calculator.
