100% Mortgage for First Time Buyers

charlotte1994 · 28 January 2019 at 10:38AM

https://www.theguardian.com/money/2019/jan/28/lloyds-unveils-100-mortgage-for-first-time-buyers

thoughts?

I think it's a fab idea. In my area, mortgages are cheaper (per monthly payment) than rent, but it's so hard and expensive to get a mortgage these days.

AdrianC · 28 January 2019 at 11:10AM

Is it a "100% mortgage"?

It seems to me to be a 90% mortgage with the 10% deposit lent by family members.

The only difference is that the bank are charging more on the 10% the borrower "borrows" than the family member puts into the savings account. 2.5% on the savings, 2.99% for three years on the borrowing.

Going on their average £33k deposit figure, that means the bank are making c.£500 on that margin. Except it's costing the parents more, because they're also paying tax on the interest. And then there's the lock-in, because how many of those FTBs will be able to remortgage after the 3yrs, since the LtV will still be higher than easily borrowable elsewhere? So you've got those customers now locked in to SVR. And you've gained a savings account customer for extra value.

Win-win-win.

shinytop · 28 January 2019 at 11:30AM

Looks a good idea. Of course it's a win for the bank. Yes, it might cost the lenders more overall than where someone has the deposit saved but at least it achieves the objective and is done openly. A lot of families will just do this themselves and fail to tell the lender.

wesleyad · 28 January 2019 at 11:57AM

This is what we used years ago, I think they've just change it from 5% required from the FTB to 0%. Was very useful for us to get on the ladder without needing to mess around with gifting deposits etc.