Bath Building Society is launching a 100 per cent, three-year fixed-rate mortgage to help would-be first-time buyers get a foot on the property ladder.
The Society has devised the 100 per cent Parent Assisted Mortgage Scheme (PAMS) in order to open up the housing market to potential buyers who are currently barred from purchasing by the high deposits required by many lenders.
The PAMS mortgage requires the parents of the buyer to provide a guarantee for the loan, and the Society takes a charge over a proportion of the parents’ home.
Dick Jenkins, Bath Building Society’s chief executive, says the 100 per cent loan – which has a 5.29 per cent interest rate – is a logical step given the Society’s strong performance record with its 95 per cent PAMS.
Mr Jenkins comments: “The 100 per cent PAMS is intended to open up home ownership to a wider demographic in a responsible, sensible way, giving young people the opportunity to enjoy the benefits of home ownership just as their parents did. This is also a sign of confidence that the housing market is starting to slowly recover and that first time buyers will be a part of that recovery.
“Studies released in recent days show that it would take the average would-be first time buyer eight to ten years of really quite intensive saving to save for the average level of deposit required by most lenders these days. Lenders have to do something radical to break through this kind of constraint on the market.
“Let me be clear this is not a return to the indiscriminate 100 per cent lending that was in vogue on the eve of the credit crunch. We will be assessing all applicants carefully to make sure the deal is right for them and that they are comfortable with how the mortgage works.
“On the experiences Bath Building Society has had so far, I don’t think this is unduly risky. The bond between parents and their children works in such a way that nobody wants to extend themselves beyond what they can afford.
“The Bank of Mum and Dad has become a significant factor in the mortgage market over the last few years. This mortgage product builds on previous successes we have had with a 95 per cent Parent Assisted Mortgage and our Buy for Uni mortgage and gives parents a way of making the vital difference to their children’s future without having to stump up a large pile of cash. This is a much more efficient way of assisting children onto the property ladder than other schemes which require a huge cash deposit.”
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