Post Office has introduced a range of new mortgages for first-time buyers and their parents.
The lender’s research found that for young potential buyers who can’t currently get on the ladder, finding a deposit is the biggest barrier (43%). The average first-time buyer may require a deposit of over £50,000, according to recent figures from the Office for National Statistics. Homes purchased by first-time buyers are likely to cost on average £210,928, with a £160,442 mortgage likely to be advanced.
While the majority of parents (81%) say they are more than happy to provide financial support if they can, there are often concerns about tying up their available savings, Post Office said; the financial commitment of helping a child onto the property ladder can require parents to potentially part with 35% of their overall wealth.
With this in mind, Post Office has now launched two new mortgage products.
Owen Woodley, chief executive of financial services and telecoms at Post Office, said: “Buying a property has always been a big commitment but trends in the current market and the challenges these present to buyers are all things that we know families want to tackle together. We have spent a lot of time talking to first-time buyers and their families and we know that parents want to do all they can for their children.
“However, four out of ten parents can’t provide direct financial support, highlighting a need for mortgages that allow families to support each other without having to part with savings.
“In response, Post Office has launched two new mortgage products; First Start and Post Office Family Link, with the aim of helping more young people realise their dreams of owning their own home.”
First Start is designed to boost the borrowing power of first time buyers through the support of their families, while Post Office Family Link helps families to provide support for young people who are trying to save for a deposit without tying up their own savings.
With a Post Office Family Link mortgage, first-time buyers will now be able to secure a mortgage without a deposit. Instead, they take out a 90% LTV mortgage from Post Office and then raise the other 10% as a mortgage secured against close relatives member’s home. Buyers make two separate repayments for the first five years – one towards the assistor’s mortgage (which is interest free) and one towards their own mortgage. The product has a 90% LTV with a maximum loan size of £500,000.
With a First Start Mortgage, first-time buyers will now be able to apply for a mortgage with a close relative, the sponsor will act as a co-borrower and have the option to be on the title of the property. The two highest incomes, from applicants and/or sponsor will be taken into account when assessing the level of borrowing, potentially increasing the amount a first time buyer can borrow.
The First Start Mortgage has product options in the 75-95% LTV range, with a maximum loan size of £500,000.