A relatively new name on the block, Aldermore Bank, has announced that it is offering a 100% loan to value mortgage aimed at the ‘disenfranchised’ first time buyer.
The bank, which was launched in 2009 and owned by the private equity firm AnaCap Financial Partners LLP, has launched the ‘family guarantee’ mortgage offering buyers the chance of a property with no deposit required.
Although it is a 100% LTV mortgage for the buyer of the property, it does require that parents, grand-parents or step-parents guarantee any of the loan amount that is above 75% LTV with a charge of the amount against their own property. This guarantee falls away after 10 years or if the loan amount falls below 75% LTV.
It comes as a three year fixed rate of 6.48% and will initially be available in England and Wales through three distributors, which include Connells, Arun Estates and 3mc.
The managing director of residential mortgages at Aldermore, Charles Haresnape, said “Many first time buyers have become disenfranchised from the housing market because of the large deposit demanded by most lenders. We believe this is the single biggest issue facing first time buyers and it needs to be addressed head on if the UK’s housing market is to have a chance of recovery. …….. Family support in the form of gifted deposits has become commonplace and is widely accepted by most lenders. The Aldermore Family Guarantee Mortgage gives much greater flexibility, enabling guarantors to retain savings and instead provide a guarantee, requiring no cash deposit. We’ve carefully considered the needs of the guarantor, resulting in a guarantee that is capped at the originally agreed amount. The guarantee can also be repaid at any time, or released if the loan to value on the mortgaged property falls to 75% or lower."
The product, although touted at 100% LTV, is effectively secured against two properties at 80% LTV (100% / 125%) of the FTB property. In this way a fall in property prices by up to 20% is not an issue for the lender as they could as a last resort recover the money from two houses.
Aldermore says that its business model is of the more traditional type. It raises deposits from consumers and then lends it out. It does not, it says, rely on wholesale, securitisation or international capital markets and that they ‘have not been involved in any banking activities or the marketing of any exotic products which have been the cause of problems for so many financial institutions’.