The “Lend A Hand” mortgage aims to help first-time buyers purchase their own home without needing to stump up a hefty deposit. But the new deal comes with a catch, as parents or other family members will need to contribute 10 percent of the loan as security into a savings account. This effectively unlocks a deal that sees the bank loan 100 percent of the property price tag to first-time buyers, who will then access a three-year fixed mortgage at 2.99 percent. The savings account will pay 2.5 percent interest, and family members will get their money back after three years on the condition of the mortgage repayments being kept up-to-date.
It must be funded before the mortgage is completed and parents must be able to lock away their money for the three-year period.
The deal will be available initially in England and Wales and at least one of the borrowers or savers must be a Club Lloyds customer.
Vim Maru, group director, retail at Lloyds Banking Group, said: “We are committed to lending £30 billion 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.
“Although times have changed, children still have a similar ambition to their parents – to own their own home.”
Rachel Springall, a finance expert at Moneyfacts.co.uk, said: “The brand new Lend a Hand mortgage from Lloyds Bank has been competitively priced and will no doubt grab the attention of first-time buyers looking to get on the property ladder.”
Just under half (43 percent) of 18 to 35-year-olds say their biggest life goal is to buy a house, according to research from Lloyds.
But half say that saving for a deposit is the biggest stumbling block to achieving this.
Meanwhile, two-fifths (41 percent) of parents would like to help financially, but worry they will need the money in later life.
Lloyds’ research suggests that across the UK the average deposit first-time buyers generally face putting down is £33,211, rising to £110,182 in London.
Halifax suggested average house price growth remained ‘stable’ last month, although house prices were 0.4 per cent lower in the final quarter of 2018 than they were in the preceding three months.
According to the Halifax House Price Index, released earlier this month, prices in the three months to December were 1.3 percent higher than the same period last year.
Values increased month on month by 2.2 percent, taking the average house price in the UK to £229,729 from £223,116 in December 2017.
Russell Galley, Managing Director of Halifax said: “In 2019, we’re expecting continued stability in house prices with between two percent and four percent price inflation.
“This is slightly stronger than 2018, but still fairly subdued by modern comparison.
“However, this expectation will clearly be dependent on the Brexit outcome, with risks to both sides of our forecast.”
AVERAGE FIRST-TIME BUYER DEPOSITS ACROSS THE UK, ACCORDING TO ESTIMATES FROM LLOYDS BANK USING UK FINANCE FIGURES:
– North East, £17,085
– Yorkshire and Humberside, £19,871
– North West, £21,495
– East Midlands, £24,853
– West Midlands, £26,494
– East Anglia, £36,714
– Wales, £16,638
– South West, £37,060
– South East, £52,204
– London, £110,182
– Northern Ireland, £17,925
– Scotland, £19,877