Lloyds TSB New "Lend a Hand" Mortgage

Since the credit crunch broke out, first-time buyers could hardly find a suitable and inexpensive mortgage deal. That is why Lloyds TSB launches a new "Lend a Hand" mortgage. The main concept of a new mortgage is that relatives or friends can guarantee a loan with savings. Up to 95 per cent of a property's value is suitable for the deal; competitive rate of 4.39 per cent is fixed for three years. Conditions look so tempting. The maximal sum of the loan is £350,000. Relatives or friends are required to be able to counterbalance 20 per cent of the loan in special savings accounts with a rate of 3.5 per cent for three and a half years. Lloyds TSB will take a legal charge over the savings; the savings must remain in the account until the borrower contributes 10 per cent equity in their home. For example, if you want to buy a £200,000 property, you should have 5 per cent deposit, which stands for £10,000, because the mortgage terms allow you to apply for £190,000. In addition, your parents, grandparents or friends must also conserve 20 per cent in the "Lend a Hand" savings account, or £40,000. The decision to elaborate a new mortgage deal came after Lloyds TSB carried out a new research proving that the major part of parents were more likely to help their children to buy their first home, in case they could keep controlling their accounts. Commercial Director of mortgages at Lloyds Banking Group, Stephen Noakes, comments that there is no similar opportunity in the banking system. Very few banks provide customers with 95% loan-to-value mortgages, and even if they do, the interest rate is incredibly high. A new Lloyds TSB mortgage deal offers advantages to both, parents, who can assist their children keeping control over the savings, and first time buyers, because they provide a realistic guarantee to compensate the risk of lending. Experts of the property market recognize that this scheme as a good sign; probably, other banks will follow Lloyds suite. Product innovations such as "Lend a Hand" mortgage deal may push up the housing market activity and buyer activity as well. It will be a positive moment to encourage the market. If all the parties realize the purpose of their participants and their commitments in the mortgage deal, it is a perfect solution: parents hold their savings on their own accounts and children get a good rate at 95 per cent loan-to-value with a lower credit score requirement.