First time buyers win with combined mortgage and personal loan

Three out of four mortgage brokers (73%) believe first time buyers will be the main beneficiaries of a combined mortgage and personal loan product, according to research by Alliance & Leicester Mortgages.

More than half of brokers (54%) expect first time buyers with little or no deposit to gain the most from a combined 100% plus LTV mortgage and personal loan, while nearly one in five (19%) think the added funding from a combined mortgage will most suit those first time buyers who need extra money for home improvements or furnishings.

One in five (21%) brokers think a 100% plus LTV mortgage can raise the overall value of a house as it allows buyers to spend the extra money on home improvements. Another 22% believe buyers will benefit from getting on the property ladder sooner, if house prices continue to grow, rather than spending time saving for a deposit.

Jeremy Claridge, Head of Specialist Mortgages at Alliance & Leicester, said: “When innovative products come onto the market, it’s important they actually fill a gap and help those who need it most. Rising interest rates and house prices means first time buyers need flexible products that will help them get onto the housing ladder.”

Alliance & Leicester’s 100% plus LTV mortgage – PlusMortgage – has a low-cost unsecured loan and gives customers the ability to make unlimited overpayments on the personal loan. This means it will not only help first time buyers who need a little extra funding to help them get their first home, but also those who have an unsecured loan and wish to pool this together at a low rate to simplify their repayment plans.

The research also highlights how more than half (58%) of brokers think there will be an increase in the need for advice on 100% plus LTV mortgage and personal loan market during the next two years.

Jeremy Claridge added: “The cost of borrowing has changed shape in the UK with first time buyers needing a bigger helping hand to get onto the housing ladder. However, with the huge range of products on offer and first time buyers coming with differing needs and knowledge, it is important they seek good quality advice to make sure they make the right decision. Buying a house is a big commitment and it is important to budget carefully for it. An adviser could point you in the right direction and make the process a little easier.”

At present, there are only five providers in the UK who lend on bundled mortgage and personal loan products, with Alliance & Leicester one of the latest to launch in this arena. PlusMortgage currently offers the lowest priced two-year combined mortgage and personal loan available up to a maximum 125% LTV, at just 6.14%. It is also the only UK mortgage provider to offer options at 100%, 115% and 125% LTV with a facility to make unlimited personal loan over-payments.