Ipswich Building Society is offering up to 95% home loans for “heartland” borrowers from the region, in a boost for first-time buyers.
Some other lenders, including Lloyds Bank, have hit the headlines by offering 100% mortgages - but the catch with those is that parents or grandparents have to lock up savings in place of a deposit.
Although Ipswich Building Society is not offering 100% loans, it has launched special “heartland exclusive” 95% LTV (loan to value) low-deposit deals for first-time buyers from the region.
Richard Norrington, CEO of Ipswich Building Society, commented: “It is no secret that first time buyers are struggling to get on the property ladder and therefore, the news that many lenders have returned to offering mortgages with smaller deposits has been widely welcomed.
“The reintroduction of 100% Loan to Value (LTV) mortgages from some lenders has however met with more reservation, but it should be noted that this is typically a ‘family offset’ product, requiring a sum to be held in a linked savings account by a parent, rather than no deposit at all.
Mr Norrington said: “At Ipswich Building Society, whilst we do not lend up to 100% of a property’s value, we are keen to support first-time buyers, and recently launched new products exclusively for ‘heartland borrowers’ in our local counties of Suffolk, Norfolk, Essex, Cambridgeshire, Bedfordshire, Hertfordshire and Buckinghamshire, which are available up to 95% LTV.
“These are also available to applicants with gifted deposits, including entirely gifted funds for those who have been renting for 12 months or more.
“In addition, we are also increasingly seeing young professionals opt for our shared ownership mortgage, especially in London and the south east where property prices are higher on average than the rest of the country.”
Mr Norrington said the society used a manual underwriting approach to understand individual circumstances.
“For any first-time buyers looking to purchase their first home, the task of saving for a deposit may seem daunting, but it is well worth spending the time to research the different mortgage options available to them, as lenders are being increasingly innovative in the way they are approaching this market.”
Meanwhile, Lloyds Bank has just announced a new 100% “Lend a Hand” mortgage to help first-time buyers get on the property ladder, with help from parents or grandparents’ savings. Other lenders offering similar deals include Barclays and Post Office Money/Bank of Ireland.
A survey carried out for Lloyds showed the average first-time buyer deposit in East Anglia in 2018 had risen to £36,714, from £22,789 back in 2008 - making it harder for new buyers to get a foot on the ladder. They also found the average house price for first-time buyers in the region had risen from £151,929 to £211,465 over the same period.
Under the new Lloyds package, the idea is that a family member can contribute up to 10% of the loan as security, instead of a deposit. The buyer and family member will both benefit from a three-year fixed interest rate.
However, there has been concern from some experts that this type of offer may leave borrowers in danger of falling into negative equity if property prices were to dip.
Many people on social media have also pointed out that the deals rely on family members having enough savings to offset - so for buyers whose families can’t afford to lock up this amount of money, a low deposit may be a better option.
• Are you a would-be first-time buyer struggling to get your foot on the housing ladder, and would you like to tell your story? Email us here.
Read more- What were the most expensive homes sold in Suffolk during 2018?
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