Mortgage deals target top and bottom of market

Published 12th Jul 2010

First-time buyers could be cheered by the Post Office's 90% mortgage A new 95% mortgage is available – if your family can stand as security. Photograph: Russell Boyce/Reuters

Two innovative mortgage deals were launched this week – one aimed at homeowners with only a small amount of equity in their property, and the other targeting those entering the final years of their mortgage.

Lloyds TSB already offers first-time buyers a 95% loan-to-value (LTV) deal called Lend a Hand, and this week it was made available to people keen to move up the housing ladder but who don't have the large deposit necessary to access many of today's deals.

The bank says it is likely to appeal to those who bought their first home at the height of the market and now need to relocate or require a bigger property, but have little equity.

With this deal, you can take out a mortgage with a deposit or equity stake of just 5%, and benefit from the sort of home loan rates available to those able to put down much more – provided someone else (typically mum or dad) puts up their savings as additional security. Your helper will need savings equal to 20% of the new property's value (your deposit and their savings must add up to 25%).

Lloyds TSB is offering a three-year fixed rate at 4.79% for people who have their current account with the group, rising to 4.99% for those who bank elsewhere. There is an £895 fee to pay.

At the same time, says the bank, the borrower's helper benefits from a decent savings rate (currently 3.75%), as a legal charge is taken over the savings to offset the risk.

So if the borrower were looking to move to a £150,000 property, they could get a mortgage for £142,500. They would put down a £7,500 deposit, and £30,000 would be provided by parents or relatives and held in a savings account earning 3.75% for 42 months.

Meanwhile, Yorkshire Building Society has launched the "Rollover Mortgage" – a rolling one-year fixed-rate deal designed to cater for those who are coming to the final years of their mortgage and need to borrow less than 35% of their home's value.

It offers a rate fixed for one year – initially 2.69%. At the end of each year, borrowers are notified of the new fixed rate offered for the following year, and will automatically "roll over" on to that, or, alternatively, they can choose to switch to the Yorkshire's standard rate or another remortgage deal.

David Hollingworth, at broker London & Country says those who sign up "will need to keep their wits about them," and review the market annually to make sure they are continuing to get good value. "Otherwise it could be a little like having your car insurance renewed automatically and failing to shop around."

David Black at financial research firm Defaqto adds: "The real test will be whether the rate in subsequent years remains competitive."

Source: ' Guardian '

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