The young adults of Britain are still dreaming that one day they will own their own home. This dream, however, is becoming bleaker and bleaker year on year. Santander ran a study to find out how they felt about the current housing market and how possible they believed it to be for them to one day own their own property. They found that 70% of young people felt that the dream was over and they would never get onto the property ladder. It has been found by these mortgage lenders that the age of first-time buyers has increased over the past decade from 25 to 33 with the oldest being in London. Miguel Sard, a Managing Director at Santander, claims that banks and other mortgage lenders must become more creative when trying to entice first time buyers as many believe they’ll be unable to get on the ladder without a large amount of help coming from their parents. This, therefore, has led to banks creating new campaigns such as the 100% mortgage from Halifax Bank and Lend a Hand mortgage from Lloyds Bank.
The no deposit mortgage explained
When looking to buy a home the biggest hurdle first-time buyers have is saving up for the deposit. According to findcourses.co.uk the average salary for a 22- 29 year old is £24,715 this drags out the saving process and delays most from being able to get on the property ladder in their late 20’s.
These new mortgages allow first-time buyers to get a mortgage for a house without having to put a deposit down. Instead, it requires parents or a close family member to deposit 10% of the house cost into a savings account with the mortgage provider. This savings account cannot be touched for a fixed amount of years depending on the bank that you have chosen to go with.
As the money is left in a savings account it can build up interest at an average rate of 2.5%. This makes the offer more enticing for parents as this is a strong rate in comparison to the standard savings accounts. They will also require to have a current account with the chosen bank in order to be eligible for these mortgages.
This mortgage lasts up to three years so that over this period you’ve will have been able to pay enough so it covers the original deposit amount. This would, in turn, allow the family member to receive their deposit back, along with interest they have gained over the time period. After completing the three-year mortgage it will also be expected to remortgage to a lower loan to value mortgage to pay off the rest of the new home.
The Halifax 100% Mortgage
If you were to take out the 100% mortgage with Halifax Bank, then you would have to start by having your family member set up a “Family Boost Fixed Savings Account” before the mortgage completion. As well as a savings account, either a first-time buyer or the family member must also set up a fee-free Halifax reward account or an Ultimate reward account that will be charged at up to £17 a month. After the three year term the supporting family member will receive their 10% deposit back as well as the 2.5% interest they have made over this time period. If you wish to find out more about Halifax’s 100% mortgage offer then make sure to go into a bank or if you are unable to make Ii into a branch then make sure to contact the Halifax customer services.
The pros and cons
- It enables you to buy a home without having to pay a deposit.
- As they are becoming more established as a loan type, they will become more flexible in the future making more people eligible for this loan
- You need to have a family member with the available finances as well as being willing to sacrifice the amount
- If payments are missed the guarantor’s deposit will be affected
- If the house price goes down then you could fall into negative equity and can affect the supporter’s deposit or risk losing their house
- It’s difficult to be accepted for a 100% mortgage
So you can see there are plenty of options out there to make the buying process easier for first-time buyers. It is difficult to get on the market, it just takes a little bit of perseverance and the willingness to save over a period of time to achieve your dream.