New British bank Aldermore will launch a mortgage specifically designed to help underserved first time buyers get a foot on the housing ladder.

The 'Family Guarantee Mortgage' is available up to 100% LTV and is designed for borrowers who do not have large cash deposits. The mortgage has a three year fixed rate of 6.48% and parents, step-parents or grandparents will be asked to provide a guarantee secured against their residential property for the amount of loan above 75% LTV.

Charles Haresnape, Managing Director of Residential Mortgages at Aldermore, said: "Many first time buyers have become disenfranchised from the housing market because of the large deposit demanded by most lenders. We believe this is the single biggest issue facing first time buyers and it needs to be addressed head on if the UK's housing market is to have a chance of recovery.

"Buying and setting up a first home is an expensive process, which puts enough strain on a first time buyers' finances without the additional pressure of needing to save a large deposit. Borrowers must be creditworthy and have sufficient income to comfortably afford their monthly mortgage repayments, with parents, step-parents or grandparents willing to provide a guarantee secured against their residential property"


Mr Haresnape added: "Family support in the form of gifted deposits has become commonplace and is widely accepted by most lenders. The Aldermore Family Guarantee Mortgage gives much greater flexibility, enabling guarantors to retain savings and instead provide a guarantee, requiring no cash deposit.

"We've carefully considered the needs of the guarantor, resulting in a guarantee that is capped at the originally agreed amount. The guarantee can also be repaid at any time, or released if the loan to value on the mortgaged property falls to 75% or lower. Perhaps most importantly, we've limited the guarantee period to just 10 years at which point it will expire, giving guarantors clarity as to how long their commitment will last."

The Family Guarantee Mortgage will initially be piloted via three distributors (Connells Group, Arun Estates and 3mc) to potential homebuyers throughout England and Wales. Loans are available on a repayment basis only, the maximum loan size is £250,000, and the minimum age of the borrower must be 25. There is a non-refundable booking fee of £299 and a completion fee of £999.

Doug Hall of 3mc said: "Most brokers are only too aware that the lack of a deposit is a major problem for both first and subsequent buyers; an issue that has yet to be adequately addressed by intermediary lenders. Aldermore's Family Guarantee Mortgage tackles the problem very effectively, having carefully considered the needs of both borrowers and guarantors. It's a great product that will give intermediaries many more opportunities to help clients."

(CD/GK)