The Times - The bank of mum and dad has competition

by Aaron Strutt

Jul 19 2014

First there was the Bank of Mum and Dad. Now there is the Bank of Family and Friends. First-time buyers with small deposits are opting to buy with friends and family members in order to get on the first rung of the property ladder, rather than continuing to rent. 

If you have a good income in relation to what you want to borrow, your outgoings are low and you have a good credit score, the next thing you need to consider is the rate you pay. “Before the downturn, lenders would offer reasonable rates on mortgages up to 95 per cent LTV [loan to value],”Aaron Strutt, of Trinity Financial, says. “Now interest rates go up every 5 per cent.”

So, if you have a 5 per cent to 9 per cent deposit, you should work out how much you would need to qualify for a cheaper rate at 10 per cent. “If it is only a small amount, it may be worth holding off and saving for longer or asking for a loan, potentially from your parents,” Mr Strutt says.

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