It is the moment we have been waiting for. At last, a mortgage lender has addressed the difficulties facing first-time buyers and put together a mortgage product that requires no deposit.
Aldermore’s ‘Family Guarantee Mortgage’ can be arranged for up to 100% loan-to-value (LTV). That means purchasers getting their first home can borrow the whole amount from the lender, without giving any cash deposit at all.
Sure, there are restrictions, as you would expect in today’s cautious market. Currently Aldermore are only trialling the mortgage – offering it through three outlets, including two estate agent groups in the south of England. It is a repayment mortgage only, up to a maximum value of £250,000.
It works by asking parents, step-parents or grandparents to provide a guarantee secured against their own property, for any loan amount above 75% LTV.
Aldermore have thought carefully about the needs of those relatives guaranteeing the property. The guarantee is capped at the agreed amount, can be repaid at any time, or released if the LTV on the new property falls below 75%. They have limited the guarantee period to 10 years, after which it will expire, meaning that supportive parents know exactly the commitment that they are making.
The single biggest issue facing first-time buyers is the difficulty of saving a big enough deposit. Even though the ‘Family Guarantee Mortgage’ is only a trial, it is an encouraging sign that new lenders are entering the market with concern to assist first-time buyers. This will help to push the market from the bottom up.
We hope that the mortgage is a success and that it becomes more widely available. Cambridge, Histon and the surrounding areas are home to a lot of asset-rich parents who would love to help their children get onto the housing ladder.
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