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Bank of Mum and Dad

20.05.09

A very interesting product was released today by Lloyds Tsb which shows two things. Firstly it has renewed my faith that lenders can still be innovative when the put their minds to it, and secondly that arguably this is a step towards lenders actively encouraging first time buyers back into the Market perhaps believing that house prices will begin to recover soon.

While there are a few conditions to this new mortgage product, they are far outweighed by the positives. 4.39% fixed for three years at 95% LTV is an exceptional rate and, presuming parents still have some spare cash floating around, will be a major fillip for certain first time buyers and therefore the market as a whole.

What’s clever about this product is that you can raid the Bank of Mum and Dad without leaving them high and dry — it’s about using capital rather than using it up, and the 3.5% fixed interest rate isn’t too bad at all in the current market. It’s effectively a 75% LTV mortgage parading as a 95% loan.

A word of caution: parents and grandparents need to understand that they don’t get their money back automatically after three years if property prices have fallen, although the general consensus is that we’re now at, or near, the bottom of the market.

Importantly, this is a clear sign that Lloyds TSB is backing the property market to recover.

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Andrew Montlake

Written by Andrew Montlake

Andrew Montlake, better known as Monty, began his journey with an Hons degree in Economics & Politics before starting in the mortgage industry in February 1994. As a main founder of Coreco in 2009, he successfully grew the brand, marketing, and communications, and was made MD in 2019 focussing on the overall vision, strategy, and culture of the company. As Coreco’s media spokesperson, Andrew can often be seen or heard on TV and radio as well as regularly commenting in the national, local, and trade press. He is the author of this acclaimed Mortgage Blog and is well-known for his social media, podcasts, and public speaking. Andrew is now proud to serve as Chairman of the Association of Mortgage Intermediaries, (AMI) as a cheerleader for the Mortgage Industry as a whole and continues to work at the coal face, writing mortgage business and advising clients.

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