Brokers have called on lenders to consider top-up mortgages as a way of helping people without big deposits.
Top-up loans work by providing a separate loan available through a third party to plug the gap between the loan to value that the lender will offer the borrower and the deposit available to the borrower.
Property investment firm Assetz will launch a top-up mortgage later this year, offering borrowers the chance to borrow up to 90 per cent of the property in conjunction with a regional lender it is not yet able to name. Money Marketing understands that a number of firms are considering offering similar top-up loans if mortgage lenders agree to lend on such terms.
Barratt Developments and Hitachi Capital offer unsecured loans of 15 per cent of the property value to parents of first-time buyers to help raise money for a deposit on a Barratt home, with an 80 per cent LTV loan from a number of high-street lenders.
John Charcol senior technical manager Ray Boulger says: “I certainly think top-up loans are a good idea. I do not think there is any valid reason why a lender should refuse to accept them, provided the cost of the loan is taken into account when calculating affordability.”
First Action Finance head of communications Jonathan Cornell says: “Lenders are trying to lend more sensibly and have less money. There are a lot of people who are stuck and cannot get mortgages. We are in extraordinary times and if these are the types of products that will help people move around the market, we should welcome them.”
But Lloyds Banking Group sales director of mortgages Mike Jones says top-up loans are “an area of concern” for the firm. He says: “Evidence suggests that people who take out topup loans and mortgages at the same time do so because they have not got the ability to afford them.”