It has been reported today that Barratt, one of the biggest UK property developers, is launching what could prove to be a highly controversial scheme.
We have all seen an increase in parents helping their children with their deposits and this is typically raised from savings or releasing monies from their own property. But how would parents feel if they were able to help their children by taking out an unsecured loan to cover the deposit their children need?
Well Barratt believes that its scheme does offer the answer to the age old problem of saving enough for that first home deposit. The initiative is said to be offering loans of up to £50,000 over a 12-year fixed period and will allow parents to take out unsecured borrowing to cover the deposit for their children. The thought behind the scheme allows the first-time buyer to obtain an 80 per cent mortgage, pay a 5 per cent deposit, and the remaining 15 per cent is covered by the loan taken out by the parents.
So is this an option for you and your parents? It is reported that this will be an unsecured loan with a fixed rate of 5.4 per cent, with the flexibility of being able to make overpayments and fee-free early redemption. Would there be parents out there willing to do this for their children, particularly if they have more than one child wanting to make that step onto the housing ladder?
Barratt is reported as saying the scheme is ideal for parents who have sufficient income to service a loan but no available capital, or people who have capital which is tied-up which they do not want to access in the short term. We all know that there is enormous demand for properties from those people who are first-time buyers still living at home or renting.
Barratt has teamed up with Hitachi Capital to offer the scheme and they have stated that the increase in the deposit amount now required by first-time buyers has had an affect on the market, and the innovative Barratt loan gives parents an option to support their children getting their foot on the ladder.
So over to you – is this something that can help you as a first-time buyer? Or, more to the point, is this something you would be willing to do as a parent?