Desperate measures for desperate times?
As house prices in the UK continue to slip-slide downwards, compounding fears that the multi-year housing boom has run out of gas, the country’s largest mortgage lender, Lloyds Bank, has unveiled a new mortgage scheme called “Lend a Hand” to help first-time buyers with little or no personal savings inject fresh blood into the souring market. It is an adjustable-rate mortgage with no down-payment and with a teaser-interest rate for the first three years of just 2.99%. It allows buyers in England and Wales to borrow the entire amount of the purchase price of up to £500,000 ($653,000).
These types of mortgages are high-risk instruments that helped fuel madcap property booms and busts, including bank collapses, in countries like Spain and the UK.
But this one comes with a parental twist. For customers to qualify, they must have a family member (or members) willing and able to place 10% of the loan in a Lloyds savings account for three years as security, where it will accrue 2.5% interest.
“Although times have changed, children still have a similar ambition to their parents – to own their own home,” said the group’s director Vim Maru. “Lend a Hand helps parents to invest in their children’s future and get the best return on their cash.”
And what happens after the first three years are up?
“We’ll also contact you with details of the mortgage options available,” Lloyds says. So on that day, fasten your seat belt. Because the 2.99% was just a teaser rate…
