Lloyds Bank launches ‘no borrower deposit’ mortgage for first-time buyers

A major mortgage lender has launched a new deal to help first-time buyers get onto the property ladder without them needing to put down a deposit.

The Lloyds Bank “lend a hand” mortgage enables parents to put money into savings which will help their adult children to buy their first home.

The mortgage needs parents or other family members such as grandparents to contribute the equivalent of 10% of the loan as security into a savings account.

The savings account will pay 2.5% interest, and after three years, provided the mortgage repayments are kept up-to-date, parents will get their money back.

By putting their money into savings, this enables parents’ adult children to access a three-year fixed mortgage at 2.99%.

The savings account must be funded before the mortgage is completed and parents must be able to lock away their money for the three-year period.

The deal will be available initially in England and Wales and at least one of the borrowers or savers must be a Club Lloyds customer.

Lloyds said its research suggests 43% of 18 to 35-year-olds say their biggest life goal is to buy a house but half say that saving for a deposit is the biggest barrier to this.

Meanwhile, two-fifths (41%) of parents would like to help financially, but worry they will need the money in later life.

Lloyds’ research suggests that across the UK the average deposit first-time buyers generally face putting down is £33,211, rising to £110,182 in London.

Vim Maru, group director, retail at Lloyds Banking Group, said: “We are committed to lending £30 billion to first-time buyers by 2020 as part of our pledge to help people and communities across Britain prosper – 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.”

Rachel Springall, a finance expert at Moneyfacts.co.uk, said: “The brand new lend a hand mortgage from Lloyds Bank has been competitively priced and will no doubt grab the attention of first-time buyers looking to get on the property ladder.”

She said that, for parents trying to help their children on the property ladder: “The bank of mum and dad can get a table-topping 2.5% fixed for three years under the lend a hand deal.”

She said that in terms of savings rates on the market generally, Al Rayan Bank pay 2.5% as a gross profit rate on its 36-month fixed bond, “which is at the top of its sector”.

Highlighting other innovative mortgages available to first-time buyers without these borrowers needing to put down a deposit, Ms Springall continued: “A similar deal on the market is the Barclays family springboard mortgage.”

Barclays offers a 3% mortgage rate for three years at 100% loan-to-value (LTV) under this deal and buyers’ parents deposit savings equating to 10% of the purchase price into a Barclays “helpful start” account.

This account currently pays 2.25% interest and, like the Lloyds deal, the savings are later returned to the parents.

Here are the average first-time buyer deposits across the UK, according to estimates from Lloyds Bank using UK Finance figures:

– North East, £17,085
– Yorkshire and Humberside, £19,871
– North West, £21,495
– East Midlands, £24,853
– West Midlands, £26,494
– East Anglia, £36,714
– Wales, £16,638
– South West, £37,060
– South East, £52,204
– London, £110,182
– Northern Ireland, £17,925
– Scotland, £19,877