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Lloyds' offers 100% mortgages to first-time buyers but the catch is ‘Bank of Mum & Dad’ backing needed

The lender will only grant the 100% mortgage if the family member of the purchaser puts a sum equal to 10% of the value of the property into a Lloyds savings account

Lloyds Bank sign
The Lloyds’ "Lend A Hand" mortgage is structured as a three-year fixed rate deal priced at 2.99%

Lloyds Banking Group PLC (LON:LLOY) is to offer 100% mortgages to first-time buyers in a seeming return to lending last seen before the 2007 financial crash but there is a catch: ‘The Bank of Mum & Dad’ needs to be involved.

The lender will only grant the 100% mortgage if the family member of the purchaser puts a sum equal to 10% of the value of the property into a Lloyds savings account.

READ: Lloyds, Barclays, RBS and other banks avoid cap on overdraft fees in FCA's new rules

Under the bank’s “Lend A Hand” deal, a first-time buyer will be able to borrow up to £500,000 for a new home, while Lloyds will pay an interest rate of 2.5% on the money deposited by the family. The Lloyds’ mortgage is structured as a three-year fixed rate deal priced at 2.99%.

The move marks a major expansion into the first-time buyer market by Lloyds, as most other lenders demand a minimum deposit worth 5% of the property purchase price.

In a statement on its website, Vim Maru, group director, Retail at Lloyds Banking Group, said: “We are committed to lending £30bn 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.

“At the heart of this market-leading product is helping to address the biggest challenge first-time buyers face getting on to the property ladder, while rewarding loyal customers in a low-rate environment.”

Quick facts: Lloyds Banking Group

Price: 28.12 GBX

LSE:LLOY
Market: LSE
Market Cap: £19.81 billion
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