With Lloyds Bank this week announcing plans to offer 100% mortgages to first time buyers, Our Residential Director Ian Bythell has said we should all be wary of exactly what’s on offer. “It may seem like a good deal at first but it is subject to various conditions and also assumes that you have a close family member willing and able to put a lump sum worth 10% of the purchase price into a savings account, which not every ones does of course, and for them to be willing to have that raided if you miss any payments”.
The Lloyds’ deal offers a mortgage of up to £500,000, which can be arranged over up to 30 years. The rate is a competitive 2.99%, fixed for three years. Over that same period, your family member’s cash sits in a linked account and earns interest at 1.5% above the base rate – a good deal in the current market. After three years they can take their cash, and you either move to Lloyds’ standard variable rate (SVR) or look for a new mortgage.
“I can understand how this may seem attractive to some first time buyers looking to get onto the property ladder but and I don’t think this is a return to the reckless lending we saw before the financial crash where loans of 125% were available in some areas, but people need to think very carefully before taking on a mortgage of this size and all the implications. Especially given the uncertainty of Brexit and what that could do to the market.
In the worst-case scenario if house prices go down, you could run into problems and very well find yourself getting caught in that negative equity trap and taking a financial hit, unable to move and with a mortgage debt higher than the value of your home. As the areas only Relocation Network Agents our advice is to seek advice and proceed with care before committing to anything. If people need clarification or further information our team of qualified mortgage advisors are on hand to assist.”