LOYDS BANK LAUNCHES ‘MORTGAGE OF MUM AND DAD’ TO HELP MORE YOUNG PEOPLE BECOME HOMEOWNERS USING THEIR PARENTS’ CASH FOR A DEPOSIT WITH THEIR RELATIVES EARNING THE MONEY BACK THROUGH A FIXED INTEREST RATE.
• Lloyds Bank launches ‘Lend a Hand’ mortgage to help young buy their own home
• Parents must tie up their savings for three years for their child’s deposit
• But they will earn 2.5 per cent interest to gain their money back over time
Lloyds Bank has launched a ‘bank of mum and dad’ mortgage to help young people become homeowners – using their parents’ cash.
The 100 per cent mortgage will be available to first-time buyers whose parents are willing to tie up their savings for three years.
The Lend a Hand mortgage requires a parent, grandparent or other close family member to lock away enough money to cover the equivalent of a 10 per cent deposit.
In return, they will earn a fixed 2.5 per cent interest on this sum. It is hoped the deal will help those struggling to build up a deposit, which is a hurdle to getting on the property ladder for many.
The average deposit is £33,211, according to research by Lloyds Bank – but in London, this jumps to a whopping £110,182.
The first-time buyer will be charged 2.99 per cent interest on the loan. The idea is that over the three years the value of the property will increase.
The bank can then use the equity built up as the deposit and release the family member’s cash.
Vim Maru, group director of Lloyds Bank, said the bank is ‘committed’ to lending billions of pounds to first-time buyers over the next few years to ‘help people and communities across Britain prosper’.
He also said that although ‘times have changed, children still have a similar ambition to their parents – to own a home’.
Research by the bank shows that the number one goal for people aged 18 to 35 is to buy a house, with half saying saving for a deposit is their biggest obstacle.
The research also found that more than two in five parents would like to help financially – but are worried that they will need the money back in later life.
Borrowers using this mortgage can access a maximum of £500,000 over 30 years. To qualify for the deal, the borrower or saver must also have a Club Lloyds current account, which is only available to customers living in England and Wales.
It is free for those who can pay in at least £1,500 a month, otherwise there is a £3 fee.