Mortgage Express and the Marketplace at Bradford & Bingley launch 'Step Ladder'

It aims to provide a tailored solution for people who require help in affording a property to suit their needs.

David Bitner, head of product operations at The MarketPlace, comments: “We recognise that at varying stages in people’s lives they can struggle to afford the property they need. Whether it’s first time buyers or key workers trying to get on the property ladder, divorcees starting out again, or growing families needing more space, it’s important to find solutions which make it possible for these people to buy a suitable home. There are already some specialist products out in the market catering to this section of borrowers, and the new Step Ladder mortgage joins these as a new type of tailored solution. It’s an advice-led product that maximises income power while managing monthly affordability. It won’t be the answer for all borrowers, but it could make the difference for some people who require a structured means of borrowing to increase their purchasing power.”

The Step Ladder Shared Equity Appreciation Mortgage – key points:

It allows you to borrow 100% of the purchase price - but only pay interest on 70%. The borrower still owns 100% of the property.

You can normally borrow 3.5 times your salary or 2.75 times your joint salary to arrive at the 70% figures on which you pay interest. This means that a borrower who is struggling to find a suitable property by traditional mortgage means can significantly boost their purchasing power.

It features a fixed rate for three years at 5.79% (APR 6.0%) through Mortgage Express. After three years the rate reverts to 1.99% over the Bank of England’s base rate.

To give people the benefit of a lower fixed payment rate up front, the mortgage is run on an interest-only basis for the first three years and then moves to repayment for the rest of the term.

Mortgage Express does not charge interest on 30% of the loan in exchange for a share of the increase in property value either when the property is sold or when it is remortgaged or on the tenth anniversary of the loan, whichever is earlier. This is calculated as follows:

First 2% per annum of growth in property value Next 10% per annum of growth in property value Anything over 12% per annum growth

Mortgage Express keeps 100% Mortgage Express keeps 30%. Borrower keeps 70% Borrower keeps 100%

The product is designed so that the maximum equity growth share that Mortgage Express can retain in any one year is capped at 5%. It is important to note that this is very different to other shared appreciation mortgages (SAMs) which did not cap the capital gain paid to the lender.

Borrowers can remortgage onto another Mortgage Express product or another provider’s deal, subject to meeting the borrowing criteria. After 3 years, there are no redemption charges.

This is an advice-led product (only available face-to-face). Customers are taken through a detailed fact find to see whether firstly the product is appropriate for them and secondly that they are fully aware of how the product works, its pros and cons and the different house price inflation scenarios.

Andrew Moss, Product Development Manager at Mortgage Express, says ‘Step Ladder is specifically tailored for people who have found that 100% loans don’t help with their situation, but very much want to buy their own home rather than rent.’

For example, a recent divorcee with children whose property requirements and financial circumstances have changed, earning £30,000 per annum would normally be able to purchase a home worth a maximum of £114,000 on a 100% mortgage – based on the most generous income multiple of 3.8 x income. With this shared equity appreciation mortgage, borrowers can secure a property worth up to £150,000.

Bitner continues: “Even people earning above-average salaries can often struggle to afford the property they need. The Step Ladder Mortgage is an advice led product which gives a formalised mortgage solution to what is an increasingly common problem. Adding a few thousand pounds to the amount that can be borrowed can make all the difference – a better area, an extra bedroom or just the first step on the ladder.”

Step Ladder is the latest in a line of specialist mortgages developed by Mortgage Express, including Buy-To-Let for limited companies and a true self cert product.