Help for first-time buyers

House prices are on the up again, rising 2.6% in the 12 months to April nationally – and 6% over this timeframe in London, according to figures published by the Office for National Statistics.

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House prices are on the up again, rising 2.6% in the 12 months to April nationally – and 6% over this timeframe in London, according to figures published by the Office for National Statistics.

Separate research from homelessness charity Shelter, shows that a couple without children will now need to wait and save for more than six years (taking the average cost of living into account) before they can get on the housing ladder, while for a  single person this rises to 14 years.

The situation is worse in the capital with those in couples having to save up their disposable income for an average 11 years and single people needing to save for a staggering 30 years to buy their first home.

The good news among the doom and gloom though, is that there are a growing number of mortgage schemes that can help – whether your parents have cash or not. Here are some of the best.

Woolwich Family Springboard mortgage

Barclays' mortgage lending arm, Woolwich launched the Family Springboard mortgage back in January this year, which is specifically designed for buyers with a 5% deposit.

But the deal requires that any family member (not just parents) puts a further 10% of the property's purchase price into the bank’s Helpful Start savings account. This pays base rate plus 1.50%, so is currently priced at 2.00%. The rate is fixed for three years during which time you will not be given access to your cash.

So if you want to buy a first home priced at £137,500, all you need to do is raise a 5% deposit of £6,875. Your parents or relatives would then need to hold savings with the bank of £13,750.

As your deposit is now effectively 15%, you will get access to a lower mortgage rate than you would taking a straight 95% loan to value deal, which often cost in excess of 6%. Woolwich’s two Family Springboard mortgages are both priced at a fixed rate of 4.69% for three years.

After three years, assuming everything remains the same and you keep up with repayments, parents or relatives will get back their initial capital plus, in the case mentioned above, £825 in interest for a basic rate taxpayer. Your mortgage can then continue without the Helpful Start Account.

Lloyds TSB Lend a Hand

Lloyds TSB offers a similar arrangement through its Lend a Hand mortgage. To qualify for the deal you need a cash deposit of at least 5% of the property's value but here your ‘Helpers’ (who can be friends or family in this case, though not more than two in number) should have savings of at least 20% of property value. In this case the percentages can vary as long as they add up to 25%.

Again, the cash backing means you can enjoy lower mortgage rates similar to those available to customers with a 25% deposit while your Helpers can still earn interest on their savings, even though the money is being held as security.

So for a property worth £137,500, the buyer would need a 5% deposit of at least £6,875, while your helpers need to put by a minimum of £27,500 with the bank.

Buyers can then get a 95% mortgage priced at 4.19% with a £995 fee, or a higher rate of 4.79% if you opt not to pay a fee. If you take a Lloyds TSB current account though, the same 95% mortgage would be cheaper at 3.99% with a £995 fee or 4.59% with no fee. The rate is fixed for 42 months – or 3.5 years.

Meanwhile, your helpers, over the same timeframe, will receive a fixed annual rate of 2.70% which will earn them a tidy £2,135 over the three-and-half year period if they are basic rate taxpayers.

Provided you don't default on your mortgage your Helpers will get all their money back at the end of the term.

Yorkshire BS Offset Plus mortgages

Yorkshire Building Society also offers an option that allows family and friends to help with the home buying process, through its Offset Plus facility, which is available on all of its offset deals – and on the equivalent mortgages for sister lender, the Chelsea Building Society. They are usually priced at around 0.20% higher than the non-offset version.

An offset mortgage works by literally offsetting your savings against your mortgage debt. So if you had a mortgage of £150,000 and £50,000 of savings, for example, you'd only pay interest on £100,000.

You will forego interest on your savings under this arrangement but, the interest you will pay on your debt will be more than the interest you would earn on your savings anyway. What’s more, you won’t pay tax on it so it works out economical again.

But with the Yorkshire/Chelsea Offset Plus deal, the helper will link their savings to your mortgage rather than you linking your own. The cash will be kept in a linked account which can be accessed at all times – but the benefit to the homeowner will increase and reduce in line with the balance. The savings account will be in the name of the saver and not the homebuyer.

While the homebuyer would be saving a tidy sum in interest payments, the helper will have to forget earning anything on their savings. This makes this more of an option for parents – or perhaps your very best (and probably loaded) friend!

NewBuy scheme

Launched in 2012, NewBuy is a government-backed initiative designed to help first-time buyers with a deposit of between just 5% and 10%, get onto the property ladder. But only new homes built by house builders signed up to the scheme qualify.

Nearly 60 developers including Barratt, Redrow and Bovis Homes are participating in the scheme in partnership with six lenders; NatWest, Nationwide Building Society, Woolwich, Santander, Halifax and Aldermore.

But each builder has a chosen lender or lenders, so if you want to buy a NewBuy property you will need to apply for a NewBuy mortgage using the builder's preferred lenders. You can find a list of developers participating in the NewBuy scheme here.

You will then be able to borrow between 90% and 95% of the property's value if you meet the lender’s criteria. Because of the government's backing, the scheme protects the lenders against losses in case of repossession which is why they are willing to provide 95% deals.

However, the initiative has been criticised for being more on the side of house builders than buyers. Indeed, many of the developments available through the scheme are thought to be unaffordable to first-time buyers or those with a small deposit.

There has also been some concern about the high interest rates offered to NewBuy scheme borrowers.

If you need help use our mortgage calculator to compare 1000s of products or alternatively contact independent mortgage broker London & Country on 0844 209 8725 for some free advice.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct

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