It has been clear for many months that if first time buyers cannot get on the property ladder then the nationwide market is going to remain in the doldrums. Enabling them to buy is a key hurdle that must be overcome for growth.
Responding to calls for innovation to help first time buyers Lloyds TSB has introduced a new concept designed to help first time buyers who can’t raise a full deposit for a house.
Lloyds TSB is extending its Lend a Hand product which already allows first time buyers and home movers with a smaller deposit to buy a home with the support of a helper, usually parents or other family and friends.
Under the new initiative, called Local Lend a Hand, Lloyds TSB is inviting local authorities across the country to take on the role of helper. It has set up a pilot scheme, announced this week, with local authorities including Blackpool, Warrington, Newcastle under Lyme and East Lothian, with a view to fully establish the scheme across the UK throughout 2011.
‘We know that a lot of young people turn to the Bank of Mum and Dad to get their foot on the ladder, but that’s not a solution for everyone. By developing Local Lend a Hand and working with local authorities across the UK, we’re broadening the prospect of home ownership to even more first time buyers,’ explained Stephen Noakes, commercial director for mortgages at Lloyds TSB.
‘Helping people to buy their first home is crucial in achieving and maintaining a sustainable housing market. With Local Lend a Hand, we’re taking our existing Lend a Hand product to another level and addressing the real challenges first time buyers face,’ he added.
Under the scheme each local authority will agree where in their area the scheme will be available. Subject to usual lending criteria, first time buyers will then be able to view properties within that area and choose their new home.
Local Lend a Hand is for loans between £25,000 and £350,000, but the maximum loan size will be dependent on the local authority. The first time buyer will put down at least 5% of the value of the property, and get the Local Lend a Hand mortgage for the remaining amount.
The local authority will provide a cash backed indemnity of up to 20% of the property value as additional security. Interest will be earned on this amount. The first time buyer will own the property in its entirety, unlike shared ownership schemes.
The fixed rate mortgage products that will be available for first time buyers during this scheme will be at a lower rate of interest than would normally be available for this level of deposit, helping them with the cost of their monthly payments.