During the credit crunch mortgage lenders put up the shutters as their appetites to lend faded away. The requirement for large deposits predominated as lenders sought the lowest risk applicants, however is the mortgage market set to thaw even more as the ‘bank of Mum and Dad’ comes to the rescue?
The news that there is at last a 100% LTV mortgage available is very welcome as first time buyers are struggling to find large deposits for their first home, particularly with the soaring costs of living and rising rents.
There is a catch though. Parents or grand parents have to be prepared to put their own homes at risk as guarantors. The Bank of Mum and Dad comes to the rescue yet again.
This seems to be a new trend in the mortgage market as the Principality has also started to offer a 95% LTV mortgage in which family members must find the money to subsidise the loan amount above 75% LTV (ie they must stump up 20% of the loan and the FTB must supply 5%).
Its pretty tough for the family members as the Principality will take legal charge over the family members savings account, who will not be allowed to with draw any money until the guarantee commitment comes to an end.
So the lending criteria are strict, especially for the family member willing to help the FTB out. However it is an innovative way of being able to offer high LTV mortgages.
Helping FTB’s gain that vital first rung on the property ladder supplies the life blood of the housing market, so this might be a small, but welcome, stimulus to an otherwise flat property market.
Let’s hope that the Bank of Mum and Dad is sufficiently well funded to help these FTB’s out. Let’s hope that other mortgage lenders find innovative ways to lend more soon too.