In a 2011 market forecast report from John Charcol, senior technical manager Ray Boulger, said that first-time buyers should borrow a deposit from a family member with savings and pay them back at a better than market rate of interest with the savings made on rate.
He explained that if a parent or grandparent has savings they can tie up for a few years but still need income, this is one way for savers to dip into funds, like pension cash and negotiate a better rate from family for their savings.
Boulger said: “The differences between interest rates charged for a 75% loan-to-value (LTV) mortgage and one at 85% is so high that a first-time buyer could afford to pay their family member an increased rate of interest.”
He added that first-time buyers are also more likely to get accepted for a mortgage as lenders’ criteria is “less onerous” at a lower LTV.
Boulger’s report follows Hitachi Capital and Barratt Homes’ joint venture to help first-time buyers get on to the property ladder.
The Hitachi Capital scheme involves parents of first-time buyers the ability to help them with a deposit using an unsecured personal loan of up to £50,000.
