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One of the UK’s largest mortgage lenders has launched an innovative new product to enable first home buyers to borrow up to 95 per cent LVR on loans of up to $700,000.
Lloyds TSB’s “Lend a Hand” mortgage, unveiled last week, offers first home buyers up to 95 per cent LVR on loans up to £350,000 ($713,000) at a competitive rate of 4.39 per cent.
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The catch is that first home buyers will need their parents, grandparents or friends to provide and store 20 per cent of the loan in a special savings account, which will pay interest at 3.5 per cent for three and a half years.
Lloyds TSB will take a legal charge over the savings until the borrower builds up a ten per cent equity stake in the property.
The product launch comes at a time when high LVR loans for first home buyers are almost nonexistent or interest rates exorbitant.
According to Lloyds the average interest rate on 90 per cent LVR products is 5.98 per cent.
Stephen Noakes, commercial director of mortgages at Lloyds said: "The legal charge on the parents’ savings account means we can offset the risk of lending at this level to offer a realistic and affordable option for first time buyers.”
“First time buyers are essential to returning the housing market back to good health because every first time buyer helps, on average, four other households move. As the UK’s largest mortgage lender we’re committed to help first time buyers onto the housing ladder and this includes finding innovative ways to lower the first rung so that it is within reach for more people.”
