It has been a while since this blog discussed specific mortgage deals and this is a fine opportunity to begin again since Lloyds TSB has just launched a new and interesting product.

The new ‘Lend a hand’ deal is a 95% loan-to-value (LTV) mortgage for first-time buyers with a rate of 4.39%, fixed for three years, and a fee of £995.

However, buyers wanting to take advantage of the product will not only need to come up with a minimum 5% deposit, they will also need to find another 20% from parents, grandparents or friends.There is a slight twist as the additional 20% will remain the property of the relative or friend, but must sit in a Lloyds TSB account held under legal charge for 42 months.

The buyer’s deposit and additional savings must make up 25% of the property’s value.

The interest rate being offered compares well with the other 95% LTV deals on the market. Both Yorkshire Bank and Clydesdale Bank have three-year fixed-rate mortgages with rates at 6.99%, while the average rate for 90% LTV products is just under 6%.

The rate of interest offered on the savings account can be beaten elsewhere but analysts, the bank and I agree that many parents would be happy to sacrifice a little interest to get their children on to the property ladder.

For a £100,000 property, a buyer taking out the mortgage would need to stump up a minimum £5,000 deposit and Lloyds TSB would offer a mortgage of £95,000.

The £20,000 required to make up 25% of the total value of the property would also have to be placed in a Lloyds account paying 3.5%. At the end of 42 months, providing mortgage repayments and increasing house prices have brought the LTV down to 90%, the legal charge will be removed from the savings account.

If the LTV is still 95% or more at the end of the term, the legal charge will remain on the savings rate until the ratio falls below 90% and the mortgage borrower will be able to remortgage on to a similar product, which Lloyds said would also come with a “competitive” rate.

If the person lending the extra money for some reason needed to take it back within the three years, Lloyds has said the bank would look at the issue “on a case by case basis”.

Analysts have described the product as ‘effectively a 75% LTV mortgage parading as a 95% loan’. However, the catches on the product potentially outweigh the advantages.

The clever ‘trick’ of the product is going beyond simply recognising that many first time buyers will be turning to relatives, usually parents, and asking for help with the deposit. This arrangement means the capital itself is working rather than being used up all at once.

One analyst summed up the feeling when he said the deal was a ‘positive addition to the mortgage market’. ‘Anything that offers another option to first-time buyers has to be a good thing’. I wholeheartedly agree.

There have been two interesting and almost entirely conflicting pieces of news recently. The first is that the number of homes being repossessed has risen to dizzying heights, but yet there has also been a large rise in mortgage lending. 

Let’s start with the bad news first. The number of homes repossessed in the
UK rose to 12,800 in the first three months of the year. This was up 23% from the 10,400 in the previous three months and 50% up on the 8,500 in the same period last year.  

Experts have predicted that 75,000 homes will be repossessed in 2009, almost double the 40,000 of last year.  

The number of home loans with arrears of more than 2.5% of the mortgage balance rose by 12% from 182,600 in the fourth quarter of 2008 to 205,300 in the first three months of this year, the CML said. This was 62% up on the 127,000 in the first quarter of 2008.  

This is despite the fact that lenders have come under increasing pressure to help out borrowers in trouble.  

A UK-wide scheme allows people who have temporarily lost their income to defer a proportion of their mortgage interest payments for up to two years.  

In November, the large lenders agreed to a minimum three-month delay before starting repossession proceedings. Many said this was standard industry practice.  

In October, lenders were told that in order to gain court permission for a repossession, they would have to show they had tried to discuss and agree alternative arrangements with borrowers. These alternatives could include a full or partial repayment holiday, changing the type of mortgage or extending the repayment term.  

So far, so depressing. But there is good news about at the moment as well. For example, the number of mortgages granted in the
UK rose sharply in March. 

Some 31,000 home loans were granted by lenders, up 29% on February but still 33% down compared with March 2008, according to figures from the Council of Mortgage Lenders (CML). 

The increase was in line with data showing more mortgage applications had been approved by lenders. But the CML warned the position was still tough for those unable to put down a significant deposit. (See previous post) 

HM Revenue and Customs also reported that completed property sales leapt by 40% between February and March.  

As a result, some people have been tempted to buy their first home. Some 12,500 first-time buyers took out a mortgage during March. This accounted for 40% of all loans, the highest proportion since April 2005.  

The combination of low interest rates and lower house prices mean that their monthly interest payment now equates to 15.1% of their income, the lowest proportion since June 2004.  

While demonstrating that there is both good and bad news in the economy at the moment is easy, it is less easy for people to judge which they will experience personally. Personal circumstances mean an awful lot and anyone in debt problems should not look at the positive statistics and think that everything will be ok.  

As always, the advice for people struggling with debt is talk to your lender as soon as possible. If you still have problems then turn to the debt charities. Do not simply ignore the problem as this is a sure fire way to find yourself part of the repossession statistics.