New first-time buyer blow as ‘Bank of Mum and Dad’ home loan scrapped
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But the bank has temporarily withdrawn the deal for new borrowers.
Just last week, Nationwide also clamped down on such contributions.
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 from historic lows. Average two
‘High incoming mortgage demand’
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.
The mortgage crunch means young buyers hoping to cash in on the recent stamp duty cut are more reliant than ever on family members to help raise a deposit.
The Lend a Hand Mortgage required parents, grandparents or another close family member to lock away enough cash 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. 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 so first-time buyers are feeling the squeeze more than anyone.’
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.’