Skipton launches Mutually Exclusive scheme

Skipton is offering 95% LTV to first-time buyers that are members of the society, through its new Mutually Exclusive scheme.

The scheme will launch on Monday 15 September 2008, and allow first-time buyers to borrow a higher LTV only if they or a family member puts a percentage of the property value in a Skipton savings account.

The Mutually Exclusive mortgage works by taking a charge against savings held with the society by the family.

It does not require the family to pay part of the deposit in order to meet any gap in savings. Instead, their savings are invested as a guarantee against the loan.

The family member must have 20% of the properties value in a savings account in order to qualify for the 95%. If they only put 19% in the account, the home buyer would then have to pay 6% as a deposit.

Skipton says this sees a return to normality in the approach to mortgage lending, by having a direct link between savings and the availability of mortgage finance.

The amount of savings under charge will be calculated from 75% of the property value, for example on a £100,000 property, if the applicant requires 95% LTV, Skipton will take a charge against £20,000 of savings.

The funds under charge must be invested in a Mutually Exclusive Account, currently paying 4.85% gross interest, and no withdrawals can be made against the money while the charge is in place.

The charge remains in place until the loan is repaid or revised to reflect a change to the equity position.

Steve Haggerty, managing director of Skipton, says: “Mutually Exclusive rewards membership and reflects a link between savings and lending that has been missing from the market for too long.

“By doing what a mutual does best, we have been innovatively traditional. This is a new take on the long-standing idea of parental or family support for first-time buyers; one that not just helps the borrower to get on the housing ladder but looks to remove the need for family to draw-down on their own savings.

“At a time when other lenders are abandoning first-time buyers, we are actively seeking ways to support them. First-time buyers are the life-blood of the market, without them it cannot operate properly. This is a substantive move to help first-time buyers, who have been failed by recent Government announcements.”