First time buyers striving to get on the housing ladder may just have a new saviour courtesy of the Post Office.
Research carried out by Opinium for Post Office suggests that the average millennial holds just £3,359 in accessible savings. With homes purchased by first time buyers worth an average £210,928, and a £160,442 mortgage likely to be advanced, it’s unsurprising that many find themselves left out in the cold.
Potential first time buyers often turn to parents or older family members for help, but with many of them needing to save for retirement, for most there hasn’t been a solution until now.
In response to the research, Post Office has launched two new products aimed at helping first time buyers get on the housing ladder without tying up family savings.
The first of these, Post Office Family Link Mortgage does not require a deposit from the buyer. Instead, they take out a 90% Loan to Value (LTV) mortgage and raise the remaining 10% as a mortgage secured against a close relative’s home. The buyer then makes two separate repayments for the first five years; in addition to their own mortgage they pay towards the assistor’s mortgage – and crucially, this is interest-free. Up to £500,000 can be borrowed via this scheme.
The alternative is the First Start Mortgage, with which buyers can apply with a close relative, who will act as a co-borrower and have the option to be on the title of the property – giving them a legal right to ownership. The big benefit of this scheme is that the two highest incomes, either from applicants and/or the sponsor will be taken into account when assessing the level of borrowing. A potentially good option for millennials working in the London area, this mortgage can fund 75-95% of the property’s value up to a maximum of £500,000.
Owen Woodley, Chief Executive of Financial Services and Telecoms, Post Office said: “Buying a property has always been a big commitment but trends in the current market and the challenges these present to buyers are all things that we know families want to tackle together. We have spent a lot of time talking to first-time buyers and their families and we know that parents want to do all they can for their children. However, [according to Opinium’s research] four out of ten parents (41%) can’t provide direct financial support, highlighting a need for mortgages that allow families to support each other without having to part with savings.
“In response, Post Office has launched two new mortgage products; First Start and Post Office Family Link, with the aim of helping more young people realise their dreams of owning their own home.”
More information on these products can be found at: postoffice.co.uk/mortgages and the Post Office has produced a guide for first time buyers available at: https://www.postoffice.co.uk/mortgages/on-the-ladder