LLOYDS TSB and Rugby Borough Council will today (Tuesday) join forces to help first-time buyers purchase a home with a deposit of just five per cent.
The Local Lend a Hand product will be available in local branches of Lloyds TSB from today.
Rugby Borough Council has set aside £1m which should help 30 to 40 buyers on to the property ladder.
First-time buyers often say that raising a deposit is the biggest challenge they face when looking to take their first steps onto the property ladder.
Responding to calls for further innovation in the first-time buyer market, Lloyds TSB worked with Sector Treasury Services, part of the Capita Group, to develop the Local Lend a Hand product. The scheme enables borrowers to buy their first home with a deposit less than the 10 per cent required by most mortgage lenders. The fixed rate mortgage products that will be available during this scheme will also be at a lower rate of interest than would normally be available for this level of deposit.
Subject to Lloyds TSB’s usual lending criteria, borrowers are able to select any existing property in the area covered by Rugby Borough Council up to a maximum loan of £135,000. First-time buyers will put down a minimum 5 per cent of the property price, and Rugby Borough Council will provide a cash backed indemnity of up to 20 per cent as additional security. The local authority then earns interest on this amount.
The first-time buyer owns the property in its entirety, and will have access to a range of products at a lower rate of interest than would normally be available for this level of deposit.
Cllr Leigh Hunt, Rugby Borough Council portfolio holder for sustainable inclusive communities, said: “For the first time in Rugby we have a scheme that will help first-time buyers to raise a deposit and get on to the property ladder. Alongside other measures, such as building new social housing and redesignating some of our sheltered accommodation, we are providing more housing options that meet the needs of our communities.”
Stephen Noakes, mortgages director at Lloyds TSB, said: “With the launch of Local Lend a Hand in Rugby, we’re making the housing market more accessible to more people. We know that many young people turn to the Bank of Mum and Dad to get their foot on the ladder, but that is not a solution for everyone. Helping people to buy their first home is crucial in achieving and maintaining a sustainable housing market. Local Lend a Hand addresses some of the real problems that prospective buyers in Rugby might face.”
Cecilie Booth, Director at Sector Treasury Services, said: “Many potential first-time buyers in Rugby, including those on the council’s housing register, or currently occupying affordable or social housing units, are unable to save a sufficient deposit, even though they could afford mortgage repayments on a typical first home. This initiative is designed to bridge that gap. Local authorities will both free up social housing for the more vulnerable and reduce payouts to private landlords and expensive short-term accommodation. More people will be able to take the step of buying their first home, stimulating the local housing market and benefitting the wider local economy. “
Those interested in the local scheme should visit their local branch of Lloyds TSB for more information.