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Aldermore launches 100% LTV mortgage

Aldermore has launched a Family Guarantee Mortgage, available up to 100% LTV.

The mortgage has a three-year fixed rate of 6.48% and parents, step-parents or grandparents will be asked to provide a guarantee secured against their residential property for the amount of loan above 75% LTV.

The Family Guarantee Mortgage will initially be piloted via three distributors, Connells Group, Arun Estates and 3mc to potential homebuyers throughout England and Wales.

Loans are available on a repayment basis only and the maximum loan size is £250,000, and the minimum age of the borrower must be 25. There is also a non-refundable booking fee of £299 and a completion fee of £999.

Charles Haresnape, managing director of residential mortgages at Aldermore, says: “Many first-time buyers have become disenfranchised from the housing market because of the large deposit demanded by most lenders. We believe this is the single biggest issue facing first–time buyers and it needs to be addressed head on if the UK’s housing market is to have a chance of recovery.

“Buying and setting up a first home is an expensive process, which puts enough strain on a first time buyers’ finances without the additional pressure of needing to save a large deposit. Borrowers must be creditworthy and have sufficient income to comfortably afford their monthly mortgage repayments, with parents, step-parents or grandparents willing to provide a guarantee secured against their residential property.”

He says it has carefully considered the needs of the guarantor, resulting in a guarantee that is capped at the originally agreed amount.  

The guarantee can also be repaid at any time, or released if the loan to value on the mortgaged property falls to 75% or lower.  

He adds: “Perhaps most importantly, we’ve limited the guarantee period to just 10 years at which point it will expire, giving guarantors clarity as to how long their commitment will last.”

David Livesey, group chief executive for Connells says: “Despite recent headlines about ‘generation rent’ and the UK taking a more European approach to home ownership, we believe there are many people who would prefer to buy their first home but feel disillusioned with the mortgage market and have lost hope of buying their own property. Indeed, our branches have registered 34% fewer first-time buyers in 2011 compared to the peak in 2007.

“Aldermore’s new 100% Family Guarantee Mortgage will help those who don’t have a large deposit but can afford monthly mortgage payments to buy their first home.”

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  • Alan Storey 3rd November 2011 at 7:16 am

    Luke

    Alan Parkinson was a regular contributor to Mortgage Strategy and held up as an IFA Guru

    He has commented on Aldermore in previous editions

  • Luke Atkinson 8th September 2011 at 1:08 pm

    Alan – what has this got to do with Aldermore offering a “100%” mortgage?

  • Alan Storey 7th September 2011 at 6:40 pm

    Bad News for IFA
    Officers from the Serious Organised Crime Agency (SOCA), backed up by Merseyside Police, arrested IFA Alan Henry Parkinson, 55, as part of a probe into a mix of fraud, perjury and conspiracy to pervert the course of justice

  • Grey Haired Underwriter 7th September 2011 at 12:17 pm

    Why all the fuss – some small building societies have been offering a facility like this for years. And perhaps it should be pointed out that this is in no way innovative – collateral charges go back to pre 1970 MIG times.

  • Chantel 6th September 2011 at 2:15 pm

    The parents may as well remortgage their property and release the equity so the kids can obtain a much more competitive and afforadble 75% rate! Not really a great deal, sorry Aldermore

  • Ketan Yadav - Avenue & Co Private Finance 6th September 2011 at 1:21 pm

    With rates like these, I would advise a client to save at least 5%-10% and get a normal reapayment mortgage. In the current marketplace, its a risky proposition as most FTB will be buying flats – which are most at risk of falling prices in a downturn. Its really a 75% LTV deal and Aldermore SVR is above 5% so borrowers could be in for a nasty surprise at the end of the initial rateand havent made up any equity – as remortgaging would be very difficult.

    Banks dont need to resort to 100% lending in the current market – especially to First time buyers – unless they were desperate for business.

  • Mark C 5th September 2011 at 7:05 pm

    Before you criticise Aldermore or any other Bank have to understand that it is very much more expensive for a Bank to fund a high LTV mortgage. Thanks to new Basel rules that mean they have to retain more reserves the higher the lending risk, it becomes very much more expensive to fund these deals.
    Anyway ,I don’t think Aldermore really expect a great take up.This is more about obtaining yet more publicity for Aldermore. they are very good at that.

  • GMS 5th September 2011 at 4:56 pm

    Anon 4.14

    Of course it is cheaper to borrow at 75% with the 25% being gifted but in the current climate with lending being restricted there are plenty of parents who have the equity but no means to release it. Could be age, income source, affordability or any number of reason. If the option is there to take cash then all well and good, but if not then this product is at least offering an alternative. May not suit everybody but it will work for some. If people are paying huge rent then they simply cannot save the deposit. Even at 6.48% it will be cheaper than renting for some people which will allow them to save any excess to reduce the amount owing.

  • Anon 5th September 2011 at 4:14 pm

    This product is exactely the same as doing a 75% purchase for the FTB and then remortgage the parents/guarantors property for the 25% deposit. This way will give the clients a much cheaper interest rate on both properties. So its not a great idea as clued up advisers have been dong these ‘100%’ mortgages for years

  • Dan McGeehan 5th September 2011 at 3:33 pm

    This is an innovative product and whilst it will not fit every client…..or please every broker it will certainly help. Plently of people are looking to get on the property ladder and not everyone’s parents/grandparents that want to help have the cash to help them…but they often have the equity

  • GMS 5th September 2011 at 3:18 pm

    Anonymous 12.35

    You would advise clients to borrow a deposit? I assume this will be declared to the lender?

  • Richard Wharram 5th September 2011 at 1:54 pm

    I think you will find that if the purchase price is £200k, then Aldermore are lending £200k = 100%. Irrespective of the additional medium term security. You have to look at the benefits of such a product and sell it to those clients who would benefit and I can think of lots of scenarios where it would work. I’d rather pay £360pw for a £250k property that I own rather than rent for the same amount in the area where I am!

  • Luke Atkinson 5th September 2011 at 1:39 pm

    Richard @ 11:34am –

    The 25% is secured by way of a charge on the guarantor’s property, this isn’t a 100% mortgage on the purchase property.

    What happens if the guarantor wants to move house? Remortgage? Or dies? A second charge will either prevent the first two scenarios or add complications to them.

    There is no real difference with this scheme in comparison to what LTSB did 2 years ago where the guarantor had to deposit the difference in a savings bond, nice try though Aldermore.

  • Matt 5th September 2011 at 1:25 pm

    Its about time that someone in the marketplace introduced a 100% product, its way overdue. And i do agree that this is a 100% product. The only difference is that its secured against 2 properties and not 1. Well done Aldermore.

  • Mukesh Patel 5th September 2011 at 12:35 pm

    I would advise my clients to beg or borrow the 10%-15% deposit and at least get a better rate and affordable monthly repayment that even the borrowed money can be repayed in a short peroid.

    100% ltv!!! who are they kidding.

  • bobby 5th September 2011 at 12:21 pm

    It still relies on someone having a 25% equity so it is NOT a 100% mortgage. It is a 75% liabaility to Aldermore only.

  • Richard Wharram 5th September 2011 at 11:34 am

    I think those that say it’s not a 100% mortgage need to read again. If it’s not a 100% mortgage, who is paying the 25% deposit – NOBODY!
    However, I don’t really agree with higher interest for higher LTV’s in any case if the client can afford the payments.
    A good start to the re-introduction of 100%
    Well done Aldermore!

  • Luke Atkinson 5th September 2011 at 11:22 am

    I agree with Booby, this isn’t a 100% mortgage, its a 75% mortgage.

  • Doug Hall 3mc 5th September 2011 at 11:17 am

    Great to see some product innovation – that is a good deal for the customer and the bank (let’s not forget they have to make money too!).

    It’s being rolled out to limited distribution initially (Brokers wanting this product now can get it via the 3mc mortgage club.)

  • mortgagemicroscope 5th September 2011 at 11:03 am

    Agree with Martin. Excellent product…just need more houses built to address huge shortfall !

  • dave whitwam 5th September 2011 at 11:02 am

    Cant afford to save up a deposit but can afford to pay interest rates 3 x higher and a £1300 fee (which I assume cant be added) …… Lets see who will really benefit from this one.. certainly not the clients. I for one wouldnt be recommending this one… Hardly TCF!

  • bobby 5th September 2011 at 10:53 am

    Martin

    How many ftb’s do you know that can save around £ 40k for a deposit ?. Many of whom are earning £ 6 per hour.

    Not many.

    This is NOT a 100% mortgage, it is a 75% mortgage.

    Try again and harder please Aldermore.

  • Martin Tapper 5th September 2011 at 10:33 am

    Cant wait to see it on general release.
    This is innovative and responds to genuine need, although it would be better to see more FTBs rising to the challenge of saving more for a deposit.
    Lets hope that the FTB SDLT will be extended beyond March. (snow ball chance in Hades)

  • Colin Liddle 5th September 2011 at 10:06 am

    What a good deal…for Aldermore ! Shame.