Halifax Mortgages

The lender Halifax has this month indicated that homes are at their most affordable level since January 2003 – but only for people seeking their first mortgages. The National Association of Estate Agents (NAEA) said: “It could be expected that this figure would rise if mortgage finance was more readily available.”

According to the John Charcol Index, the broker’s monthly mortgage activity monitor, the increase in first time buyers coming to the market is continuing to rise. In April the broker saw 21% of their business come from first time buyers, a figure that in October 2008 stood at only 4.1%. The broker reported that many first time buyers have managed to raise 25% deposits in order to access a better, wider choice of mortgage deals. Mostly, it reports, this funding was aided by borrowers parents.

In response to this strategy from first time buyers, Lloyds TSB have introduced a new 95% mortgage to tempt first time buyers as they only need to raise a deposit of 5%. The ‘Lend a Hand’ mortgage offers a rate of 4.9%, the same as other mortgages available asking for a 75% deposit, and has an arrangement fee of £995. Applicants must however qualify for the loan, friends or relatives, parents for example, must hold 20% of the property’s value in a separate account. These savings will be placed into a special account within the bank earning a fixed interest rate of 3.5% for three and a half years.

Stephen Ludlow says: “With the current low rate of interest for savers, parents with investment funds may feel this is a win-win situation. First time buyer mortgages are key to getting the property market moving. Whilst the mortgage offer may not be viable for everyone it’s a start and hopefully other lenders will follow suit.”

This account has a legal charge to cover the bank should the borrower default on the mortgage and the house be repossessed. In this event the bank can only claim 75% of the value of the house, so the money in the savings account protects the bank from being left out of pocket. No money may be removed from this account for three years and the borrower has built up a 10% equity stake in the property. Once the loan-to-value ratio has fallen to less than 90% through repayments and increasing property prices, the borrower will then be able to operate their mortgage independently and the legal charge removed.

Lloyds bank comments:
“ the new mortgage offers parents a way of aiding their children on to the property ladder, whilst retaining the management of their savings.

ludlowthompson has a range of properties available for first time buyers, including our first time buyer ‘Property of the week’.

Tags: halifax mortgages, The National Association of Estate Agents

Category: Property Finance