Hinckley & Rugby Building Society has announced it will split mortgage products to help create more personalised products for borrowers, such as first-time buyers being helped by their parents.
A split to a joint borrower, sole proprietor mortgage could enable a parent to have a shorter term when still earning from employment, and the child to have a longer term to reflect income levels in the earlier stages of their working life.
Split terms are available across all Hinckley & Rugby’s residential mortgage products, including those which may appeal to later-life borrowers.
A split into part repayment, part interest-only could suit borrowers who envisage retiring when the repayment term ends and then paying the interest-only split from pension income. Hinckley & Rugby also allows pension income to be used for affordability up to the age of 85.
Carolyn Thornley-Yates, head of sales and marketing for Hinckley & Rugby, said: “We wanted to add the ability to split so we can help first-time buyers where the parent’s working income is needed for affordability.
“Almost all parents will plan to retire, usually before a child’s mortgage term would end. Splitting the terms recognises this reality, while enabling families to do what they can to help their next generations into home ownership.
“Splits can also work for later-life and mid-life borrowers who foresee wanting the make capital repayments while working and then service the remaining balance using pension income to pay on an interest-only basis.
“As a mutual, we are committed to supporting all of our members throughout their financial lives. For our borrowers that means we work hard to be there for them which they buy for the first time, the next time and all subsequent times.”
Hinckley & Rugby’s current product range includes a newly reduced rate on its later life five-year fix at up to 75 per cent LTV, down from 3.99 per cent to 3.49 per cent. The application fee is £199 and completion fee £800. The early repayment charge decreases from 5 per cent in year one to 1 per cent in year five.
The society's fee-free 95 per cent LTV Joint Borrower Sole Proprietor two-year fix had its rate cut from 3.49 per cent to 3.29 per cent. At the end of the fix there are three years at the discount rate, currently 4.49 per cent. The ERC steps down from 2 per cent in year one to 1 per cent in year two.
However, Sebastian Riemann, mortgage adviser and financial consultant for Libra Financial, said he was not keen on split mortgages.
He commented: "They are too complicated. Joint borrower, sole proprietor is effectively the same as the old guarantor type mortgage, which I believe is generally far better understood and more workable."
This comes as research from sustainable housing business Engen Group carried out research among 1029 British adults over how they planned to help the next generation to buy a house.
The study revealed that 26 per cent of people with adult children have given them money as a ‘gift’ to help them on to the property ladder. A further 7 per cent have provided them with loans to do this, while 24 per cent said they plan to provide financial assistance to adult children in the future to help them get a mortgage.
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