Lloyds seeking to lure first-time house buyers

In many cases, it might be assumed, parents will switch some of their money into their child's name, to hit the required 10% equity level.

Then they can withdraw the rest of their money, possibly to restart the process to get a second child onto the property ladder!

As every 'Lend a Hand' mortgage is on repayment terms, the chances are the borrowers on both 25 and 30-year loans will hold 10% of the equity after three years.

If prices continue to fall, however, there is a risk that they won't. In that case, anyone who has put their money into the scheme remains locked in.

If the parents can't get out after 42 months, Lloyds TSB moves then to another loan charged at Bank base rate plus 0.5%, or into another fix. Or the borrower may remortgage with another lender.

It should not be long, even on the gloomiest prospectus, before the owner reaches the required 10% threshold.

Lloyds TSB research found that 68% of parents said they were more likely to help their children into their own home if they could retain control and earn interest on their savings.

Ray Boulger at leading broker John Charcol thinks Lloyds TSB is formalising what happens already on an unofficial basis.

"Many branches of 'The Bank of Mum and Dad' have proved more robust than many of our high street banks, haven't needed a Government bailout and recognise that providing a son or daughter with a sizeable deposit is often a good way of utilising savings," he says.

"A surprising number of first-time buyers have managed to find deposits of at least 25% in order to access a wide choice of mortgages and get a cheaper deal."

John Charcol figures show that in each of the first four months of 2009, the percentage of loans going to first-time buyers hovered around 20%, and was 20.9% during April.

Boulger says that most would-be buyers won't have friends or relatives with a spare £20,000-plus which can be locked away for an unknown length of time, so it will only help in a minority of cases.

But those lucky enough to be helped might be able to buy at a well-timed moment, before the whole market has fully recovered.

Boulger sees one other big advantage in the scheme: parents who agree to put money into a house bought by their son or daughter can lose some of that money if the couple break up and decide to sell up.

With this scheme, the parents's money remains fully under their control, and continues to earn an income on their behalf. All that is uncertain is when the money is fully returned to their control.

Clare Francis at Moneysupermarket.com says: "Products like this help kickstart the market. Not all first-time buyers needing a 95% loan will be able to take up the offer, but it should prove popular with many parents willing to help their children in this way."

Andrew Mortlake, a director at brokers Coreco, says: "Presuming parents still have some spare cash floating around, this will be a major fillip for certain first-time buyers and the market as a whole.

"What's clever about the product is that you can raid the 'Bank of Mum' without leaving them high and dry - it's about using capital, rather than using it up, and the 3.5% fixed interest rate isn't bad at all in the current market."

:: Information: Details of 'Lend a Hand' mortgage from Lloyds TSB from branches, on 0800 783 3534 and online at on www.lloydstsb.com/mortgages; John Charcol 0800 718 191 and www.charcol.co.uk.

Poundnotes

:: Over two million British motorists head for the Continent each year, but 38% of them are clueless about their level of cover south of Calais, and 18% of drivers wrongly think travel insurance covers them for driving abroad, warns uSwitch.com.

The price comparison agency says the good news for drivers is that most insurers have upped the number of days drivers can be covered abroad for free, but some providers only allow motorists three consecutive days overseas as part of their policy.

"If motorists want the same level of protection overseas which they enjoy in the UK, for example fully comprehensive or third party, fire and theft, they must upgrade their policy before the trip," uSwitch.com advises.

"If they fail to do so, they could be left liable for any damage to their car and to another driver's car if they are involved in an accident".

Drivers should also check documents to see if they require a 'green card' which may be needed if they are going to an area not automatically included in their policy.

Enquiries: 0800 093 0607 and www.uSwitch.com.

:: So many claims are being made under Mortgage Payment Protection Insurance (MPPI) policies as homebuyers lose their jobs that premiums are soaring, warns Simon Burgess at independent broker Burgesses.

"Buyers who opt for the cheapest cover might find the quality of cover is poor when they need help," says Burgess.

"For example, some policies include a 60-day excess, which can mean insurers only pay out at the end of the third month after somebody loses a job. That may be too late to stop some families getting into serious debt."

Latest figures from the Association of British Insurers show 32,077 claims made under MPPI policies in January - a 203% increase on the previous year's figure.

Burgess says quality insurers are handing out £3 in claims for every £1 collected in premiums. It means borrowers on existing policies face a steep rise in premiums when they renew.

British Insurance enquiries: 0845 0175 178 and www.britishinsurance.com.

:: Holidays abroad this summer might not be quite as expensive as many Britons fear. Despite warnings of further pain in the UK economy, sterling has hit its highest level of the year against a basket of currencies, says John Dolan at broker No1 Currency.

He sees sterling "on course" to test 1.60 against the dollar, and maybe 1.15 against the euro for a "year high".

"With countries such as Greece, Ireland, and Portugal facing crippling debts, it is up to Germany and France to back rescue packages," he says.

"There is a view the Euro has been overvalued and the perceived strength of the single currency does not reflect fading the Eurozone economy."

No1 Currency: 0800 840 2889 and www.no1currency.com.

:: One in three pensioners still has a mortgage, and with an average outstanding mortgage of £43,000, their total mortgage debt is £140 billion, claims equity release specialist Key Retirement Solutions (KRS).

The 70-plus age group has loans averaging £48,442, reckons KRS, partly because the maturity values of many endowment policies comes in way below figures originally predicted.

:: High-five savers:

Phone No Rate Account Period Deposit Interest paid

ICICI Bank UK www.icicibank.co.uk 4.40% (F) HiSAVE Fixed Rate Five Years £1,000 OM

Halifax www.halifax.co.uk 4.40% (F) Web Saver Five Years £500 Yly

Barclays Bank 0800 494949 3.55% Golden ISA Instant £1 Mly

United Nat Bank 0800 218 2266 3.50% Three Month Gold Deposit Three Months £1 Half-yearly

Nat Counties BS 0845 603 4876 3.26% Guaranteed Cash ISA Instant £1 Yly

:: Top-five borrowers

Phone No Rate Period Max% Adv Fee Incentive

HSBC 0800 494999 2.49% discounted for two years 60% £249 Yes

First Direct 0845 610 0100 2.89% variable for term 80% £799 Yes

HSBC 0800 494 999 2.95% variable for term 75% £799 Yes

Co-Op Bank 0800 633 5286 3.24% to 31/09/12 75% £ 995 Yes

The One Account 0845 610 1060 3.75% for term 75% nil Yes

Code:

*F - Fixed

*P - Operated by Post

*B - Operated by Post/Telephone

*T - Operated by Telephone

*W - Operated by Internet

*H - Operated by Internet/Telephone

*S - Available only to those aged 50 or over

*R - Available to those aged 60 and over.

:: Source: Money£acts - Tel: 01603 476 476 (All rates subject to change without notice).