Lloyds Bank’s new £5,000 deposit mortgage is “a genuine shot in the arm for aspiring homebuyers”, according to brokers.
The product, which is also available through Halifax and via brokers, provides a mortgage at a £5,000 deposit for first-time buyers and is aimed primarily at renters who are coping with significant regular housing costs.
The mortgage, a five-year fixed rate product, will be available on properties worth up to £300,000, have a maximum loan-to-value of 98 per cent and a maximum loan-to-income ratio of 4.5 times.
Applicants will need to pass strict affordability and credit checks to qualify for the product, which launches on May 18, but it will not be suitable for all first-time buyers.
Explaining the benefit of this product, Coreco CEO, Andrew Montlake, stated that, for many would-be buyers, the issue is not whether they can afford the monthly mortgage payments, it is whether they can save up for a deposit while paying for rent and other everyday living costs.
He also discussed the importance of the product coming from a large lender like Lloyds, detailing that, even though there are already good low-deposit mortgage options in the market, when one of the UK’s largest lenders puts its weight behind this part of the market “it matters”.
“It sends a message of confidence and gives more borrowers a realistic route on to the housing ladder,” he explained.
“Lloyds should be applauded for recognising potential buyers stuck on the sidelines through no real fault of their own.”
Similar praise was displayed by Compton Financial Services director, Martin Rayner, who said: “Anything that helps FTBs on to the property ladder is positive, especially when many renters are already paying more each month in rent than they would on a mortgage.
“For the right buyer this could be a lifeline, but it should be compared carefully against other options such as family assist or guarantor-style mortgages before committing.”
Caution
However, some brokers suggested caution about the new product such as Alexander Southwell Mortgages mortgage director, Jamie Alexander.
Alexander warned that, while it is encouraging to see a lender of Lloyds’ size targeting the FTB market, the product’s price cap of £300,000 may be impactful.
“For buyers in the UK that’s workable, but in London and the South East it will put a significant chunk of the market out of reach, which is arguably where the deposit struggle is felt most acutely,” he said.
This view was echoed by EHF Mortgages managing director, Justin Moy, who suggested that the cap would be a “huge stumbling block” around London and the South East in particular.
tom.dunstan@ft.com
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