A unique range of hybrid help to buy mortgages have been released by the Leeds building society that offer customers financial aid from the government and a 0% interest rate that is applicable for the first three or six months of loan term.
The new offerings are primarily targeted at individuals who are seeking to purchase newly built homes, and would slash their monthly contributions by hundreds of pounds during the first quarter or half year of the loan term, enabling lenders to have a far great level of disposable income to deal with the high cost of living at present, the lender has argued.
Leeds have also released a new 10 year fixed rate help to buy mortgage that is currently the only one of its kind on the market at present. Market analysts have already forecasted that the number of long term fixed rate mortgages available on the market will rise in the aftermath of the new regulations on mortgage lending, and the Leeds latest deal is a clear indicator that the market will likely move in this direction in the upcoming months.
The new rules were officially launched from the 26th April, and involve lenders applying two tiers of stress testing to mortgage applicants incomes in order to ascertain whether they will be able to afford their monthly mortgage payments both at present and in the near future when the Bank of England raises their base rate from its current historic low of 0.5%.
Market analysts have highlighted that the new rules only apply to mortgage deals that are less than 5 years and thus the forecast that the number of long term deals will rise significantly in the next few years is based on the assertion that lenders will want to avoid making numerous rejections on short term mortgage applications, instead acquiring their business from longer deals that the new stress testing does not apply to.
The new help to buy mortgages on offer from Leeds fall under the equity loan scheme, which was the first phase instigated by the government last year. The scheme consists of the government supplying people who wish to purchase a new-build home with an equity loan of 20% and enabling mortgage applicants to acquire a secured loan for as little as 75% of the total price of the new build home.
The new 10 year deal will enable mortgage holders to enjoy a three month 0% interest period before they move to a higher rate of 5.16%, or a longer 6 month period of 0% after which the borrower is moved to a 5.34% rate. There are also five year deals on offer with an initial rate of 0% for either 3 months or 6 months, after which mortgage holders will be moved to a higher rate of 4.13% and 4.4% respectively.
During the opening months of their loan term, mortgage holders will still be required to pay off the capital, and any interest they fail to pay off at the start will be added onto payments at a later date. However, the first payments will be substantially smaller than if an individual had acquired a more conventional mortgage and will give them an easy start to their secured loan term as they make the transition into having an important fixed sum to pay each month.
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