by Mark Johnston
First time buyers are considered generally to be the major driving force behind the housing market. When they purchase a property it then allows homeowners to buy bigger more expensive properties. This in turn helps to support the economy by spurring shopping for paint for their new home to white goods. First time buyer numbers however have dropped significantly over the past few years as buyers have been forced out of the market with the recent financial crisis.
With this in mind the Nationwide building society has launched a savings account which enables first tine buyers to apply for a mortgage with just a 5% deposit.
Any first time buyer aspiring to buy a home of their own can open a “save to buy” account. This account pays interest of 2.5% gross on balances of up to £20,000. Once
The account holder has had the account for at least 6 months and providing they have been saving a minimum of £50 a month, they can then apply for one of the company’s 95% loan to value(LTV) mortgages, which previously had only been available to existing Nationwide customers wanting to re-mortgage.
The Nationwide currently offer a 95% loan to value (LTV) mortgage fixed for 3 years at 6.29% or fixed for 5 years at 6.89%.
David Hollingworth, of mortgage broker London and Country said that first time buyers may be able to find better saving rates elsewhere, however the Nationwide 95% loan to value (LTV) deal was welcome on the market.
Although the major downsides to this ‘save to buy’ account is that it does not guarantee a mortgage, it merely suggests the Nationwide will consider the application.
Whilst a small band of lenders offer mortgages to those having only 5% deposit, majority of other lenders now require parents or other family members to act as guarantors.
Lloyds TSB allows first time buyers to take out a mortgage with a deposit of just 5%, providing someone else (usually mum or dad) puts their own savings up as additional security. In short their savings and the 5% deposit must be equal to 25% of the property value.
Parental assisted mortgages are another deal some lenders offer. These mortgages use the equity in parents property to enable first time buyers to secure a higher loan to value ratio than perhaps would normally be available to them.
The Bath building society offers two such deals , a 3 year discounted rate of 4.89 % on up to 90% loan to value (LTV) and also a standard variable rate, currently at 5.29 % for the lifetime of the mortgage on a 95% loan to value (LTV).
The ‘family first’ guarantor mortgage offered by National Countries building society is a fixed rate deal of 4.99 % until November 2013 on a 95 % loan to value (LTV) ratio. However this deal is subject to a charge over the guarantors home.
There are a few good deals on offer although these all depend on parents help to obtain them.
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