Home loan to help you and your children

BRITAIN’S biggest building society has launched a mortgage which lets parents raise cash to help their children onto the property ladder while cutting their own home loan bills.

Nationwide’s deal is aimed at homeowners who do not have tens of thousands in savings.

Parents can borrow extra money against the equity of their home and gift it to a child or grandchild to use as a deposit. The parent then gets a discount of up to 0.2 percentage points off their home loan. Last night Rachel Springall, for financial website Moneyfacts, welcomed the deal.

She said: ‘At a time when house prices continue to rise, borrowers pay out on rent and their savings don’t reach very far, any kind of assistance to help struggling firsttime buyers get on to the property ladder will be a bonus.’

Many first-time buyers are locked out of the housing market by prices which are rising more than three times faster than wages.

Official figures show average property prices rose 6.2 per cent to more than £218,000 in the 12 months to January, the 57th consecutive yearly increase. By contrast, wages grew just 1.7 per cent over the same period, according to the Office for National Statistics.

This has led to nearly six in ten first-time buyers turning to their parents, who typically contribute £17,600 to their child’s first home, said insurer Legal & General.

Nationwide’s Family Deposit Mortgage allows new and existing customers to borrow up to 80 per cent of the value of their property.

Existing customers releasing funds for a relative get a 0.2 percentage point discount on their mortgages. New customers moving their mortgage to Nationwide get a discount of 0.09 percentage points.

The family member receives the money as a gift, not a loan, and must also take out a mortgage with Nationwide.

Currently it has home loans starting at 1.15 per cent so customers who release extra cash could pay as little as 0.95 per cent.

David Hollingworth, of mortgage broker London & Country, said: ‘Thousands of first-time buyers are still having to rely on the Bank of Mum and Dad. While most parents would probably help, you’ve got to make sure you can afford the extra debt or you could get into trouble.’

‘Any assistance will be a bonus