Halifax Launches No Deposit Mortgage

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September 2019
mortgage-no-deposit

Halifax Launches No Deposit Mortgage

Halifax is launching a montage that will allow first-time buyers to get on the housing market without a deposit—but they will need assistance from their family to qualify.

The three-year Family Boost mortgage is one of a number of guarantor or highly leveraged mortgages appearing on the market to assist first-time buyers unable to scrape together the average deposit of £33,000.

With Halifax, first-time buyers will now be able to borrow 100% of the purchase price of a home, without putting down a deposit. Interest on the mortgage is fixed at 2.9%.

However, the borrower will need a family member to deposit 10% of the purchase price of the home into a special Halifax savings account, which they won’t be able to touch the three year term of the mortgage.

The money in the Family Boost Fixed Savings Account will earn a market-leading 2.5% interest during that time. In comparison, the best interest rate on a three-year fixed rate savings account is currently 2.15%, from Zenith Bank.

The cash is refunded, plus that interest, after three years. It can be forfeited if the borrower defaults on the mortgage loan, however.

At that point the buyer should have built up enough equity in the property to qualify for a loan with a lower loan to value ratio when remortgaging.

The Family Boost mortgage, with can be extended to £500,000 and over terms of 30 years, is available to buyers in England and Wales.

While Halifax is catering to a market that increasingly favours small deposits and highly leveraged mortgages, like other lenders they haven’t quite pulled the trigger on a 100% mortgage like those seen before the financial crash.

While the Family Boost mortgage allows homebuyers to borrow 100% of the purchase price of a home, the family contribution means it doesn’t quite qualify.

In January Lloyds became the first lender in a decade to offer a zero deposit mortgage. However the Lend a Hand mortgage similarly requires family members back up the loan—by depositing 10% of the purchase price into the borrower’s bank account.

Bank of England data shows that mortgages with loan to value (LTV) ratios of greater than 90% made up 18.7% of all lending in the first three months of 2019—the highest rate of highly leveraged lending seen since the financial crash.

While there are just a few no deposit mortgages on the market, all with conditions like Lloyds’ or Halifax’s or only available to existing customers, homebuyers who can scrape together just a 5% deposit have many more options. In July of this year there were 336 fixed rate mortgage deals available to those with a 5% deposit. Five years before, in July 2014, there were just 149.