by Mark Johnston
One of the UK’s biggest property developers, Barratt has launched a new scheme to help first time buyers buy their first home. The Scheme will allow parents to help their children get onto the property ladder by taking out an unsecured loan to cover the cost of a deposit.
The new initiative which is a joint venture between Barratt and the financial services arm of Japanese company Hitachi will offer loans of up to £50,000. The loan will allow parents to take out unsecured borrowing to cover the deposit for a home for their children.
Barrett hopes that the new scheme will allow first time buyers to obtain a 80% loan to value mortgage as with just a 5% deposit with the remaining 15% being covered by the loan taken out by the buyers parent. This may seem like a great deal for those who have struggled to find a mortgage to cover their dream home but in the current economic climate, many will find it difficult to find willing parents.
The loan can be taken out for up to £50,000 over a 12 year period. With a fixed rate of just 5.4% and flexibility of being able to make overpayments and fee free early redemption, its certainly a good offer for those willing parents.
Mark Clare, chief executive Barrett said: “We are genuinely excited about this because it gives parents a low-risk way to reduce the size of the deposit which their children have to raise in order to buy a home of their own. This product is ideal for parents who have sufficient income to service a loan but no available capital, or people who have capital which is tied-up and which they do not want to access in the short term. We know there is enormous demand for homeownership among people under the age of 40 who are currently renting, and this product will make it easier for them to take that all important first step on the ladder.”
The managing director of Hitachi Capital, Gerald Grimes said: “10 years ago first-time buyers had to raise around £10,000 for a deposit. Today that figure is closer to £30,000, and in some parts of the country £50,000, and therefore it is no great surprise that this vital aspect of the housing market is currently so weak.This innovative Barratt loan gives parents an affordable option to support families getting on the housing ladder without dipping into hard-earned savings.”
Recently Barclays and Bovis homes teamed up to offer a special mortgage product that only required a 10% deposit. The offer, called ‘the perfect 10’ because you need a 10% deposit or have a 90% loan to value (LTV) and the interest rate is fixed at 4.99% for two years.
Once the two year period is finished the product reverts to a lifetime tracker at the Bank of England base rate plus 2.49% which is also one of the lowest rates in the market place.
There are many other features of the perfect 10 mortgage from Barclays Banks via their mortgage lending arm the Woolwich. The arrangement fee is a market average of £999 but you also get three years unemployment insurance and £500 towards the cost of legal fees during the purchase of your house.
Bovis also providing a mortgage indemnity guarantee that covers a percentage of any loss in the property if it gets repossessed in the first seven years. The overall package has been brokered by insurance broker Jardine Lloyd Thompson and is one of the first new products specifically aims at first time buyers and to also help the ailing new build housing sector.
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