New mortgage hopes to open door for first time buyers

New mortgage hopes to open door for first time buyers

Loughborough Building Society’s new first-time buyer deposit mortgage is designed to help those who believe becoming a homeowner is a pipe dream.

The building society’s product comes off the back of research it conducted into attitudes among potential first-time buyer. Its findings reveal 85 per cent of those surveyed identified the struggle to save a deposit as the main obstacle. 

Its new mortgage enables borrower to apply for a mortgage even if they don’t have a deposit - instead leveraging financial help from the parents or grandparents of applicants. 

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Family members may use their savings to fund the deposit, by placing the funds in a specially designed Loughborough BS account, or through using their own equity as a guarantee. 

Loans of up to 100 per cent of the value of the property are possible, subject to an individual assessment of each applicant, including their income after household expense and other financial commitments have been taken into account. The minimum loan value is £90,000, while the maximum available will be £300,000.

Gary Brebner, chief executive at the Loughborough Building Society, said: “It’s a sad reality that many young adults currently believe they will never become a homeowner and with the rise of house prices and the stagnation of the average salary, the story is only likely to get worse.

“Initiatives such as [our] First Time Buyer Family Deposit mortgage are a great way to give first-time buyers that extra helping hand that they need to get a firm foot on the property ladder and should hopefully encourage more young adults who are thinking of buying that there are other options out there and help is available.”

Loughborough’s survey echoes previous reports on the challenges facing first-time buyers, including findings from the Resolution Foundation that millennials will have spent £53,000 in rent by the time they reach 30, making the chance of saving extremely hard. 

Michelle Lawson, mortgage broker at Lawson Financial, said: “These innovative products are great, to a point. I’m always concerned when the person carrying the weight of a mortgage is the parent, especially if they still have their own loan to repay. 

“I think we need to be weaning millennials off this idea that they are entitled to everything when they want it. If they can’t afford to become homeowners right now, they should learn to wait until they are in a better position.”