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.
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.”