First-time buyers will need a deposit of only five percent [plus costs] if they take out a new mortgage just announced by Lloyds TSB. But maybe this is a hot air offer, because first home buyers will also need mum and dad to put up a 20 percent lien. [How many parents do you know with a big slab of idle money?] First home buyers are a valuable part of the market mix, as first home buyers help on average four homes to change hands in a domino effect.Home loans for 95 percent of the property value have been virtually unobtainable recently as lenders responded to the economic crisis by tightening lending criteria, and anticipating property value slides. This period of uncertainty is not over.The new mortgage, called Lend a Hand, offers a three-year fixed rate of 4.39 percent. As mentioned, borrowers will need their parents to deposit a sum equal to an additional 20 percent of the property value in a savings account with the bank. This money will not be accessible until the outstanding loan falls below 90 percent of the property value.And even worse for Mum and Dad, what happens to the money if their kids can’t meet the mortgage repayments? The savings account will pay a competitive fixed interest rate of 3.5 percent. Although the bank will take a legal charge on the savings account, the parents retain ownership of their savings.Lloyds TSB said "If, at the end of the deal, the combination of mortgage repayments and rising house prices has moved the mortgage from 95 percent to 90 percent of the property value, the legal charge on the savings account can be removed and the first time buyer can operate their mortgage account independently, either on Lloyds TSB's standard variable rate, by switching products or remortgaging."Borrowers would save almost £100 a month by comparison with the industry's average rate for a 90 percent mortgage of 5.98 percent, the bank added.Stephen Noakes, commercial director of mortgages at Lloyds Banking Group, said: "First-time buyers are essential to returning the housing market back to good health because every first-time buyer helps, on average, four other households move."As the UK's largest mortgage lender we're committed to help first-time buyers onto the housing ladder and this includes finding innovative ways to lower the first rung so that it is within reach for more people.He added: "Market conditions mean virtually no 95 percent loan to value mortgages are available at the moment, while the few that are come at a high price with stringent credit requirements."The legal charge on the parents' savings account means we can offset the risk of lending at this level to offer a realistic and affordable option for first time buyers. It also gives parents a way of helping their children without actually having to write the cheque."The new loan charges a fee of £995.
If you are a Llyods banker, it gets better all the time.
