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Under warranty

Paul Thomas measures industry reaction as Halifax scrap its guarantor mortgage for brokers

Halifax will no longer be offering guarantor mortgages through brokers, opting instead for a Lloyds TSB product that is only available direct, meaning there will be fewer options for first-time buyers.

Guarantor mortgages allow borrowers to use a family member or close friend to guarantee the mortgage.

Lend a Hand, which was originally a Lloyds TSB product, requires borrowers to put up a 5 per cent deposit but if parents have savings equal to 20 per cent of the property value in a Lloyds’ savings account, borrowers can get the rates available to someone with a 25 per cent deposit.

Their parents continue to earn interest on savings held in the account.

Other lenders still offering guarantor mortgages include Northern Rock and Nationwide who both say they have no plans to withdraw their products.

Savills Private Finance director Melanie Bien says Halifax’s decision narrows the options available.

She says: “It is a shame if you lose an option because, for certain types of borrower, having a guarantor option is important to get the size of loan they need.

“Many people do not need a Lend a Hand-type deal, they just need a guarantor element on their standard mortgage.

“However, I think both products have a place. Nationwide, for example, has a guarantor scheme, which is still quite popular.”

Mortgage Practitioner principal Danny Lovey feels Halifax’s move starves brokers of another product.

’This is an accountant’s decision and does not take into account the feeling of the market’

He says: “It does not cost anything to keep it going. Why take away something that is useful now and again?

“This is what I would call an accountant’s decision. It does not take into account the feeling of the market.”

David Hollingworth, London & Country head of communications, says parental help in acting as guarantors or providing a deposit is remains extremely important in helping buyers.

He adds that while the Lend a Hand product is innovative, it is not a like-for-like replacement for a guarantor mortgage.

He says: “The withdrawal of Halifax in considering guarantors is not a positive thing. Lend a Hand is useful but it does a differen job to that of using a guarantor.”

But some brokers say the decision makes sense due to a limited demand for the product.

Coreco director Andrew Montlake says: “If Halifax says it has not had much call for it, why should it keep it out there when it has another product that is more popular?”

Montlake says that while ideally both mortgages would be available to the market, at least Lend a Hand offers another option.

Group director at Mortgage Centre IFA Fahim Antoniades says the guarantor market is small and few people qualify. He adds that those who do meet the criteria can normally afford a deposit anyway.

However, Antoniades does not think the new Lend a Hand offering is any different from putting down the required deposit and that the guarantor and Lend a Hand schemes are fundamentally different in their focus.

He says: “Lend a Hand is really focusing on the deposit development whereas the Halifax guarantor mortgage focused on income. Lend a Hand is probably more relevant in today’s market, providing the borrower has enough income to service the loan.

But Ray Boulger, senior technical manager at John Charcol, still sees Halifax’s decision to scrap the guarantor mortgage as an unwelcome development.

He says: “Any reduction in the facilities available to purchasers or in the number of lenders offering it is clearly unhelpful because it reduces competition.”

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