The number of first time buyers is now at an all time low accounting for only 29% of mortgage applications in the last year . And as property prices continue to increase at a far greater rate than graduate salaries, that elusive first house purchase is becoming further and further out of reach for many young people. This is particularly true in Greater London - where many young professionals and graduates seek their first job - but where the average one bedroom flat currently costs around £195,100 .
Leeds & Holbeck's new 'First Steps' guarantor mortgage (launching 13 June) provides the ideal solution for first time buyers and young professionals struggling to get on the housing ladder, by using their parents' (or another close family member's) income as a basis for borrowing an increased amount.
How it works: -
· The maximum mortgage available is calculated on the guarantor's income less existing commitments.
· The guarantor must have good family ties with the applicant and be able to demonstrate the ability to cover their own financial commitments together with the applicant's total mortgage commitment
· The Society's normal income criteria is applied to assess the mortgage, but by using the guarantor's income as a basis for the maximum loan
· The guarantor can be released at any time providing the borrowers income covers the outstanding mortgage (based on normal lending criteria)
· The borrower can supplement income by taking in lodgers providing the lodger signs the Society's occupier consent form
Product details: -
· Aimed at young professionals or graduates who are starting their career and have good employment prospects
· 5 year stepped fix rate:
o for LTV of 90% interest rate is 4.49 % until 08/05 then 5.49% until 08/08
o for LTV of 95% interest rate is 4.99 % until 08/05 then 5.99% until 08/08
· Maximum LTV is 95% with no higher lending fee applied
· 20% capital repayments allowed each year penalty free
· Early Repayment Charges are set at 5/4/3/2/1 months interest at SVR depending on whether the mortgage is redeemed in year 1/2/3/4/5 respectively
Key benefits: -
· Allows parents or close family to help first time buyers or young professionals on to the property ladder
· Security of set payments in first five years with lower payments in first two years
· Allows young professionals/first time buyers to borrow more and therefore purchase the property they actually want in the area in which they want to live, rather than making do with whatever they can afford on their own at the time
· Applicant can begin to build a good credit history
· Applicants can feel secure in the knowledge that they are paying off a mortgage debt which will result in them owning a property much earlier in life, rather than spending a large number of years renting while also trying to save for a large deposit
Tony Burdin, Head of Marketing & PR, Leeds & Holbeck Building Society said: "With house prices so high, first time buyers have to scrimp for longer to save bigger deposits to make their first purchase, by which time their ideal property may have become unaffordable. The 'First Steps' guarantor mortgage is the ideal solution, since it allows young professionals, with the help of parents or family, to buy a property long before they could afford to do so alone."