Lloyds Bank has added a new “Lend a Hand” mortgage, a 100 per cent mortgage fixed for three years at 2.99 per cent, to its range.
A deposit of sorts is required to access the product, however: another family member will have to put 10 per cent of the loan as security in a savings account for three years, where it will accrue 2.5 per cent interest.
The Lend a Hand mortgage is available through direct channels only.
In late November last year, polling from YouGov showed that 48 per cent of the UK wanted to see the reintroduction of mortgages of this type, and the BSA has been vocal in its support for lenders to “revisit the case” for 100 per cent LTV lending.
Lloyds group director Vim Maru says: “We are committed to lending £30bn to first-time buyers by 2020… and Lend a Hand is one of the ways we will do this.
“Although times have changed, children still have a similar ambition to their parents – to own their own home. Lend a Hand helps parents to invest in their children’s future and get the best return on their cash.”
Moneyfacts financial expert Rachel Springall commends the new product, but points out that the Barclays Springboard mortgage could be a better option for some borrowers, despite being fixed at a slightly higher 3 per cent for three years: “Parents would put up a deposit of 10 per cent, held within its Helpful Start Account, which offers a lower rate of savings interest at 2.25 per cent gross and is returned after three years,” she says.
“However, should base rate rise, the rate is guaranteed to be 1.50 per cent above bank base rate, so savers could earn more interest than the 2.50 per cent offer with Lloyds Bank’s Lend a Hand… [but] should interest rates fall, savers will see their interest dwindle.”
“The Lend a Hand mortgage from Lloyds Bank has a maximum term of 30 years, but the Barclays Family Springboard mortgage has a maximum term of 25 years. Therefore, borrowers looking to reduce their monthly repayments will find the Lloyds Bank deal very accommodating, but they must be mindful that the longer the mortgage term, the more interest it will cost overall,” she concludes.