Barratt Developments has stepped in to help first-time buyers get a foot on the housing ladder.
The biggest house builder in Britain has tied up with Hitachi Capital (UK) to offer loans to parents and guardians wanting to help their children with the deposit they need to secure a contractor mortgage.
Newly built homes are generally considered more expensive than their older counterparts and therefore represent a bigger risk to the lender.
Under the new scheme, parents can submit an application for an unsecured loan of up to £50,000. Barratt says the scheme will make it possible for borrowers to take out an 80% LTV mortgage using a deposit of 5%. The 15% balance will be met through the Hitachi unsecured loan, meaning the buyer could spend up to £333,000 on the purchase of a new home.
The loan is charged at a fixed rate of 5.4% over 12 years, there are no penalties for early repayment and unlimited overpayments are also penalty free.
This new deal looks like a win – win situation all round. Parents wanting to help their child will no longer need to remortgage and young purchasers will be able to overcome the strict mortgage lending criteria that demand large deposits.
Barratt Developments chief executive, Mark Clare, said the builder was genuinely excited about the new offering because it allows parents to help their children in a low-risk way. The loan is the perfect solution for parents who do not have available capital but can afford the loan repayments. Many people under the age of 40 would like to buy their own home but up until now, they have been unable to meet the deposit requirements. This new product should make it easier for them to get a mortgage.
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