Parents may be offered unsecured loan to help with kids’ deposits
January 17, 2011
These days first time buyers face a tough time when it comes to getting onto the property ladder. Apart from the high property values that they have to contend with there is also the fact that lenders are looking for huge deposits, which most young first time buyers simply don’t have.
In some cases parents are able to help their kids with a deposit, which allows that to get their foot onto the all important first rung of the property ladder. However, there are also parents that would like to help their kids to pay a deposit towards a home but simply don’t have the cash to do so.
One company, Hitachi Capital, thinks it may be able to help. The financial service group has got together with the house builder, Barratt Homes, in order to offer what it believes to be a solution. Some parents may be eligible to borrow £50,000 on an unsecured basis from the lender, which they can then give to their kids to help them with a deposit towards their first home.
However, there have been mixed reviews to the ’solution’ from many consumers, many of whom believe that this is just another scheme by lenders to increase borrowing again in what has become an already fragile financial climate.
One industry official said: “Parents keen to help their children with a deposit, but who don’t have spare cash available, could find this is the solution. The advantage of an unsecured loan is that it is separate from the mortgage, where your own loan-to-value is so important. The loan rate is competitive, plus payments are spread over 12 years. It is good to see innovation in the sector, with developers and lenders working together to find solutions to the problems facing first-time buyers struggling to get on the housing ladder.”
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