Thursday, May 21, 2009
Return to mad lending
Daily Mail: Home help from mum and dad thanks to new account
Britain's biggest bank has waded into the battle for first-time buyers with a mortgage that allows them to tap into their parents' savings.
Lloyds TSB's Lend A Hand mortgage offers first-time buyers a 95 per cent loan to value mortgage at an attractive rate of 4.39 per cent.
The idea is that the buyer and their parents, grandparents or friends, who are keen to help out, pool their resources to provide a 25 per cent deposit, bringing the interest rate down significantly.
But rather than give the buyer the cash, parents can retain control of the money by locking it away in a savings account that has a legal charge on it, until the mortgage has moved from 95 per cent LTV to 90 per cent LTV. Lloyds will have a hold on the money until the property owner has 10 per cent inn equity.
16 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. george monsoon said...
How would this ever work in a market where prices are falling?
2. 51ck-6-51x said...
Only that the part of mad lender is now being pushed onto friends & family.
3. little professor said...
George - How would this ever work in a market where prices are falling?
But house prices only ever go up, innit? You can't lose with bricks and mortar, in a couple of years time property prices will be much higher due to all that pent up demand and that.
4. jack c said...
Guy's dont get too hung up on this one - as someone who knows LTSB very well, this IMO is a gimmick to shine the spotlight on those with savings (including those parents with savings at other institutions) and subsequently sell them some of their more profitable products.
In any event I have it on good authority the that funding availability is drying up quickly (particularly with Santander group)
5. mark wadsworth said...
Fine scam.
Parents lend money to Lloyds at 3.5% (net of tax = 2.8%), Lloyds then lends to borrower at 4.35%. The operation is more or less risk-free from the bank's point of view.
What's not to like? It'll make for interesting conversations round the Xmas table when parents inform borrower that half their savings have been taken away to cover nequity.
6. denzil said...
Sounds more like an insurance scheme for lenders to protect themselves against falling house prices and also to shore up their balance sheets.
7. a saver said...
Great scam indeed mw. And of course the point that house prices are still so silly that FTBs can't afford them without turning to friends and family, or the banks being silly enough to lend huge LTVs, is ignored.
8. alan said...
Mortgage lending is down. Money is drying up. Soon the NuLab government will find out overseas countries won't fund its debt spree.
I personally think this is just an advertisment for LTSB. Sooner or later ministers will claim to have "cracked the mortgage problem" after half a dozen people take up the scheme.
I know several people who want to trade up slightly because of job moves. The banks/building societies are very cagey about lending!
9. Ingermany said...
The lender is effectively taking 4 years of interest payments up front and looking after it (in the same way a kidnapper looks after a hostage). If the borrower misses some payments, or loses his job, the bank just take the arrears from the parental account. No need for courts, or to worry about new rules on avoiding repossession. It's a risk free propect for the bank. I think I might buy some bank shares.
10. Tom said...
"Lloyds TSB will today unveil the Lend A Hand mortgage, where up to £20,000 of savings held by a relative or friend can, in effect, be used to boost the buyer's deposit."
This reads to me like a maximum of £20000 can be used to "boost the deposit". As they have to put down 20%, this allows the borrower to buy a £100000 property. Not many of those round my way....
11. stillthinking said...
This does have an impact on credit creation though, because the banks were prepared to create the full amount required for the loan previously. Now they are not. So the banks are window dressing a reduction in lending, while maintaining the facade of finance being available for current prices.
One way or another there is less lending and as gm@1 says, this doesn't work because in itself it pushes house prices down (reduction in aggregate lending). So they have announced a house price supportive scheme which is destructive of house prices.
This is a balance sheet exercise to raise "capital reserves" by locking up deposits. Our deflationary problems are from a collapse in lending, which has come from a collapse in house prices, -not- the collapse in house prices itself. In so far that this is a reduction in lending, it is hard to see where the economic value is.
12. crunchy said...
Britain's biggest bank has waded into the battle for first-time buyers with a mortgage that allows them to tap into their parents' savings. Lloyds TSB's Lend A Hand mortgage offers first-time buyers a 95 per cent loan to value mortgage at an attractive rate of 4.39 per cent. The idea is that the buyer and their parents, grandparents or friends, who are keen to help out, pool their resources to provide a 25 per cent deposit,
That's not a 95% mortgage. More crap!
13. crunchy said...
Daily Mail: Home help from mum and dad thanks to new account
Crunchy Mail: Home help which you shouldn't need no thanks to a con worthy account.
14. timmy t said...
So Lloyds can PAY the government to insure against bad mortgages, or CHARGE borrowers' families to do the same.... Think I know which one of those I'd opt for too.
Why don't they go the whole hog and lend 100% LTV at 5% interest (Obviously just so long as the equivalent savings are tucked away paying 2%...). Tw@ts
15. montesquieu said...
And in today's edition of 'You and Yours', a mortgage misselling scandal that has fleeced the pockets of well to do middle Englanders and caused major strife within families .... back in 2009 blah blah di blah
16. braindeed said...
Seems no-one has commented on the Mail site - there's honest vox pop for you......chortle.