Is new deposit free mortgage a good idea?
A new mortgage deal to hit the market could prove controversial as it requires no deposit whatsoever for first time buyers.
Lloyds Bank has launched the Lend a Hand loans with sums of up to £500,000 on offer.
It agrees to lend 100 per cent of the value of a property to first-time buyers only but on the condition that a family member agrees to deposit savings equivalent to a minimum of 10 per cent of this loan into a fixed-rate savings account with the bank. The mortgage rate will be 2.99 per cent for three years.
The fixed-rate term for the relative’s money is 2.5 per cent for three years, and the money cannot be removed in this period.
It could prove controversial as, broadly speaking, the easily availability of finance for property was one of the causes of the credit crunch a decade ago.
However, this offer is from a well-known British bank with the security of a family member’s money backing the mortgage loan.
Anyone considering the mortgage is encouraged to seek independent financial advice before proceeding.
Vim Maru, group director of retail banking at Lloyds Banking Group, said: “We are committed to lending £30billion to first-time buyers by 2020 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.
“At the heart of this market-leading product is helping to address the biggest challenge first-time buyers face getting on to the property ladder, while rewarding loyal customers in a low rate environment.
“Although times have changed, children still have a similar ambition to their parents – to own their own home. Lend a Hand helps parents to invest in their children’s future and get the best return on their cash.”
Don’t forget to join our Home Ownership Register if you are seeking to rent or buy a new home in north, south or west Dorset.