Lloyds TSB first time buyer mortgage should be applauded

Andrew Hagger of Moneynet.co.uk comments on the new First Time Buyer (FTB), ‘Lend a hand' scheme launched today.

There are undoubtedly many would be homeowners looking to take that first step on the property ladder but in the last 18 months have been unable to raise a big enough deposit to meet lenders LTV demands.

It is right that lenders have adopted a more cautious approach to mortgage lending and it is unlikely we will see a return to 100% plus lending again, apart from in a few exceptional cases.

The fall in house prices means that affordability is less of an issue than it has been for a while; it is the unemployment uncertainty and massive deposit requirements that have been the barrier to those looking to buy their own home.

Many parents will want to do all they can to help their children buy their first property and the terms of the ‘Lend a hand' policy are likely to prove popular with parents who have sufficient capital to lock away for at least 42 months.

The fixed rate of 3.5% can be beaten in the fixed rate savings market; however it is still a respectable rate in the current market. If parents were to invest say £30k (20% deposit on £150k mortgage)in a best buy fixed rate savings deal at 4.35% (ICICI Bank UK) they would lose out on £714 (net of 20% tax) over the 42 months - a sum of interest that I'm sure many would be prepared to sacrifice in order to help their children get a place of their own.

Product innovation such as this deal from Lloyds TSB will give a much needed shot in the arm to the FTB market. An increase in FTB activity can only have a positive knock on effect on links further up the property chain.

Hats off to Lloyds for developing this product, let's see if other lenders follow suit with similar offerings in the near future.