OK, contraversial issue here. We all know that Banks are not popular. This is largely due to the credit crunch, which was partly caused by irresponsible lending – which meant that many of us had large mortgages approved and so fed the property price boom – which was really little more than self inflated borrowing and a general lack of supply, not genuine “market forces”. Anyhow, with all the horrendous press that Lloyds have had – and my blog about them recently was not exactly favourable, they have launched a new 95% mortgage facility for first time buyers. 

On the one hand this appears to be good news. However there is a catch. This is only available where a “helper” (or a local authority) signs up for their “lend a hand scheme” and effectively underwrites what used to be called the mortgage indemnity guarantee (MIG) by providing Lloyds with a 20% deposit. This is really an insurance polcicy against default on the loan. So the local authority is stumping up cash to underwrite a nationalised bank to get first time buyers into a property market that is still overpriced. So in practice, this is nothing more than a 75% mortgage. True some interest will be paid to the “helper” for their 20% deposit with Lloyds (by Lloyds… oh that’s you and me still isn’t it?). I’m not exactly jumping with joy at the prospect of further ineptitude from Banks are you?

Loans can range up to £350,000 for a first time buyer – so assuming that this sum is 95% of the purchase price which would be about £368,421 with a maximum deposit of £18,421…. which probably still requires an income of £100,000 to secure the £350,000 loan… for a first time buyer! So at the top end I don’t see these selling like hot cakes and the scheme seems to have more than a whiff of hot air about it, but hey… its for the journey…the question is surely TO WHERE?

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