Blow for first-time buyers as Lloyds bosses axe 'Bank of Mum and Dad' home loans
- The bank has stopped accepting new applications for its Lend a Hand mortgage
- Loan was available to those whose parents were willing to tie up their savings
- Lloyds has withdrawn the deal amid concerns about economic uncertainty
- Conditions on those deals that are still available have also become stricter
First-time buyers have been dealt yet another blow after it emerged that Lloyds has pulled its ‘Bank of Mum and Dad’ mortgage deal.
The 100 per cent Lend a Hand home loan was available to those whose parents were willing to tie up their savings for three years.
But the bank has temporarily withdrawn the deal for new borrowers amid concerns about economic uncertainty.
Just last week Nationwide also clamped down on contributions from the Bank of Mum and Dad.
First-time buyers are dealt a blow as Lloyds pulled its ‘Bank of Mum and Dad’ mortgage deal
Under its new rules, buyers applying for a 90 per cent mortgage must prove that no more than a quarter of their deposit was gifted to them by their parents.
Since the pandemic the number of mortgages for those with smaller deposits has plummeted.
There are now just 46 deals on offer for borrowers with a 10 per cent deposit compared to 758 this time last year, according to Moneyfacts.
There are just 16 deals left for those with 5 per cent deposit, down from 388.
Mortgage rates are also beginning to creep up after a period of historic lows.
Average two and five-year deals across all deposit sizes have increased by 0.09 percentage points since the start of July to stand at 2.08 per cent and 2.34 per cent respectively.
Low-deposit loans, which lenders consider to be more ‘risky’, have seen particularly significant rate increases, Moneyfacts said.
The mortgage crunch means young buyers hoping to cash in on the recent stamp duty cut are more reliant than ever on family members for help raising a large enough deposit.
Yet their dreams of homeownership are hanging by a thread as lenders introduce strict new rules. The Lloyds Lend a Hand Mortgage required parents, grandparents or another close family member to lock away enough money to cover a 10 per cent deposit for three years.
They would earn a 2.94 per cent interest rate on their savings, while the young buyer would be advanced a 100 per cent mortgage.
The removal of the deal is a blow for first-time buyers as 95 per cent loan to value deals disappear from the market (stock image)
The idea was that over the three years, house prices would increase. The lender could then use the equity built up as a deposit and release the family’s cash.
But the bank has refused to accept new applications since April. David Hollingworth, of L&C Mortgages, said: ‘There just aren’t enough mortgages for borrowers with a 10 per cent deposit, let alone 5 per cent, so first-time buyers are feeling the squeeze more than anyone.
‘It means these types of family guarantor deals are important as an alternative.
‘But what we really need is for more lenders to start offering 90 per cent mortgages again.’
A Lloyds spokesman said: ‘Based on current economic uncertainty, and to maintain our service levels over a period of high incoming mortgage demand, we are not taking new Lend a Hand applications for the time being.’
v.bischoff@dailymail.co.uk
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