5% Deposit With a Little Help From a Friend

by Mark Johnston

The banking group Lloyds TSB has taken a move to offer one of its headline mortgage rates to home movers as well as first time buyers.

Lloyds TSB ‘Lend a Hand’ mortgage was launched to help first time buyers onto the market. The Lend a Hand mortgages allows borrowers to take out a mortgage with just a 5% deposit. Other lenders offering similar deals are offering their products at a much higher interest rate. Lloyds TSB offers the mortgage at a very competitive rate of 4.79% with a loan to value (LTV) ratio of 95%.

The Lend a Hand mortgage does require backing from a family member by securing part of the mortgage on their assets. The ‘helper’ benefits from getting a 3.75% savings rate on the funds that are securing the property although Lloyds TSB do take a legal charge over them in order to offset the overall risk. This is a new approach but does allow first time buyers a step onto the market with one of the smallest deposits on the market.

Many first time buyers have been priced out of the market as lenders are asking for at least 10% deposits; whilst better deals are asking for up to 40%.

Lloyds TSB commercial director, Stephen Noakes, says: “It’s not always easy to pull together a big deposit in today’s market, but this product can make the move to a new home not only more achievable, but more affordable.”

Applicants must hold a current account with Lloyds TSB to get the 4.79% rate whilst non account holders pay 4.99%.

The mortgage was initially aimed at first time buyers but now Lloyds have opened up the offer to what they are calling first time sellers. The move should help support homeowners who are looking to move but do not have a large deposit.

Stephen Noakes went on to say: “The product retains all of the features that make it so unique – borrowers can move with just a 5% deposit but without the high price tag that it would normally bring. At the same time, their family can provide their support and benefit from a competitive savings rate.”

Other mortgage providers are starting to offer better deals for first time buyers with smaller deposits but none have come near to Lloyds headline rate.

Halifax are offering a 95% loan to Value mortgage at 5.19% until July 2011 when it reverts to their standard variable rate of 3.5%. Although the mortgage does not have to be secured against other assets; it is only available to existing borrowers who are looking to re-mortgage. If you are a first time buyer or a homeowner looking to move you’ll have to look elsewhere.

Ulster Bank, the Irish arm of NatWest is offering first time buyers a discounted mortgage at 3.45%. The good news is the loan to value (LTV) is 95%. With a mere £295 fee this may be just what many are looking for.

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