Family backing needed in Lloyd’s new 100% mortgage for first time buyers


Lloyd’s Bank are to offer 100% mortgages to first-time buyers , providing that a family member can put up 10% of their intended property’s asking price.

Britain’s biggest lender have dubbed their new product “Lend a Hand”, which will allow new borrowers to apply for up to £500,000 without having to put down a deposit. The amount equivalent to 10% of the loan will be put into a Lloyd’s savings account opened by the relative as part of the agreement.

Last year the Building Society Association called for more 100% mortgages to be offered to try to tackle falling homeownership and encourage FTBs.

The mortgage is for up to 30 years, the savings are secured for three years and pay a rate of 2.5%. If repayments are kept up for the three years, the family member involved can then take the money back.

Doors of Bank of Mum and Dad open more and more

The Lloyd’s deal follows the increasingly popularity – or even necessity – of ‘The Bank of Mum and Dad’ to the FTB market in the UK. Legal and General estimated that nearly 320,000 prospective buyers would turn to their parents for help when buying in 2018, and Totally Money found that 16% of millennials do not save money at all.

However, having parents who own property themselves is increasingly important for those looking for a loan. The Resolution Foundation found recently that 30-year-olds without property-owning parents are 60% less likely to be homeowners than people whose parents are homeowners. The Lloyd’s product will also rely on parents – or other family members – who have the financial ability to back the loan.

Deposits remain a huge barrier for young buyers

In a survey, Lloyd’s found that half of 18 to 35-year-olds say that saving for a deposit is the biggest barrier to getting onto the property ladder.

Vim Maru, group director of Lloyds Banking Group, said: “We are committed to lending £30bn 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.”

However, a note of caution was sounded by David Blake, principal mortgage adviser at Which?

“Such mortgage deals could see you falling into negative equity if the value of the property drops, leaving you owing more to your mortgage lender than your home is worth,” he told The Independent.

“While this might seemingly offer a lifeline to getting on the housing ladder, it’s important to seek expert mortgage advice to ensure it really is the best and most sensible option for you and your family.”

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Bank of mum and dad

Family backing needed in Lloyd’s new 100% mortgage for first time buyers


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