Mortgages  

Keeping it in the family for first-time buyers

The Family Building Society has discounted the rates on its three and five-year Family Mortgage fixes at up to 95 per cent LTV.

Three-year fixes have been reduced by 0.15 percentage points to 3.14 per cent, while five-year fixes have been cut from 3.79 per cent to 3.44 per cent. Both come with a £545 product fee.

The lender, which launched in 2014, increased the procuration fee for introducing intermediaries from 0.45 per cent to 0.55 per cent, in May.

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In January, the provider reduced the rate of interest for its five-year ‘low start’ mortgage, which was designed for borrowers who are faced with significant changes to their financial circumstances, such as divorce or taking time off for maternity or paternity leave.

The loan is available at 1.39 per cent for the first six months, 2.79 per cent for months seven to 12 and 4.09 per cent for the remaining four years.

Provider view:

Cammy Amaira, head of intermediary sales at Family Building Society said: “We continue to keep our mortgage offering competitive, and the cut in our rates proves this point.

“The feedback that we have received from intermediaries and borrowers has been very positive. The Family Mortgage was designed specifically to allow family members to help first-time buyers by providing security and offsetting facilities.

“As home ownership becomes an ever more distant dream for younger borrowers, that fact that we can offer loans up to 95 per cent of a property’s value is very significant and, with the benefit of offsetting, you will not get a lower monthly payment anywhere on a 95 per cent loan.”

Adviser view

David Wilson, managing director of NE Money Limited, based in Tyne and Wear, said: “The products represent good value, but I would be inclined to think that the lending criteria was very strict. The deal might be short-lived because the lender probably has limited funds in which it can offer the product at such a low rate. Deals like these are aimed at getting customers through the door with the hope of keeping them on the books.

“Building societies are chasing the high street banks in that they are lending up to 95 per cent loan-to-value. Unlike the banks, most of them are not using a credit score card system but do credit searches instead, which is good news for borrowers with a clean credit rating.”

“I do not think that there will be a return of 100 per cent LTV mortgages. They are simply too high-risk for lenders. I think lenders will start to relax their mortgage criteria but hopefully not to the same extent of the pre-2008 days.”

Charges

£545 product fee and 0.55 per cent procuration fee.

Verdict

A lot has been said about first-time buyers and their struggle to clamber onto the property ladder. As the rate war rages, lenders have taken to reducing interest rates on their high LTV products, which is good news for borrowers.