Principality’s Assisted First-Time Buyer deal is a four-year fixed at 4.49%, with a product fee of £499, available through Principality’s branches.
It requires that first-time buyers put down a minimum deposit of 5%, which with family savings must add up to 25% of the property value. Any family member or friend can act as an investor.
Principality will take a legal charge over the Assisted First-Time Buyer Savings Account, paying 3.75% AER, fixed until 31 August 2015, during which time the family member will not be allowed access to their savings.
After the four-year period has ended, the legal charge will be lifted if the LTV has reduced to 90% through repayments and house price rises, so allowing family members access to their savings.
Christopher Johnson, mortgage manager at Principality Building Society, said: “Parents have become a valuable source of help for first-time buyers in a lending climate that demands much higher deposits.
“While it is clear that parents are willing to undertake acts of extraordinary generosity to help provide a secure future for their children, there are some drawbacks to gifting a deposit. Many parents who lend their children deposits will not recoup their money until the house is sold in the future.
“The advantage of allowing parents to use their savings as security for the mortgage is that they retain ownership of their money. They will continue to earn interest on their savings, while the child gets access to mortgage rates usually available to those with a larger deposit.”
