Available from branches only, the Lend a Hand range had been available just to first-time buyers but from today all borrowers can access it. The range offers buyers and now home movers the opportunity to access a 95% LTV deal at an affordable rate by offsetting their risk against a guarantor’s savings, provided the savings are with Lloyds TSB.
Lloyds TSB believes first-time sellers who bought at the top of the market will benefit from the product’s extension to home movers, as these are the borrowers most likely to have little equity in their homes.
Provided a parent, grandparent or other family member has deposited savings with the lender (3.75 AER gross) Lloyds TSB will offer rates on a 95% deal from 4.79% with a fee of £895. A legal charge is taken over the savings to offset the risk.
Despite this product only being available direct the extension of the deal to home movers may boost activity in the intermediary market, as movement in the housing market prompts other buyers to move.
Stephen Noakes, commercial director of mortgages at Lloyds Banking Group, said: "It's not always easy to pull together a big deposit in today's market, but this product can make the move to a new home not only more achievable, but more affordable.
"The Lend a Hand mortgage has been a very successful way for people to take their first steps in the housing market. It's great news that it can now support those that are looking to move up the ladder too.
"Borrowers can move with just a 5% deposit but without the high price tag that it would normally bring. At the same time, their family can provide their support and benefit from a competitive savings rate."
David Sheppard, managing director of London-based broker Perception Finance, said the impact the product would have depended on how far-reaching it was and whether it could be applied across the whole Lloyds Banking Group.
He said: “In itself it’s a good product though it still only appeals to niche client. We’ve only seen the redistribution of wealth in terms of parents helping children to get on the property ladder in the past 12 to 18 months, so I’m not sure how much demand they’ll see.
“Having said that, it’s certainly a step in the right direction, but clearly it would be nice if Lloyds TSB could have offered it via intermediaries as well.”
And Mike Fitzgerald, sales director at broker Essex-based broker Brentchase Financial Services, said he thought the demand for this product would also be low.
He said: “I’ve never been a lover of mortgages that rely on other people’s savings.
“I can see this causing more problems than it solves – imagine a couple taking out that mortgage against one set of parents’ savings and those parents split up? The whole thing then has to be untangled.
“I’m in favour of more deals being offered at 95% because it does free up the market, but I don’t think there’ll be a rush of people looking to tie up their parents’ savings in a mortgage.
“I don’t think that will attract many buyers. But lose some more of those strings and you never know.
“If the current product was available to intermediaries I think you’d get most brokers finding ways not to recommend it!”
