Young Professionals Helped Onto The Property Ladder
Some lenders are beginning to offer mortgages aimed at helping young professionals to get on the property ladder. Scottish Widows, Newcastle Building Society, Bristol & West and Standard Life Bank have mortgages which require no deposit and might allow you to borrow more money than you might usually expect – so long as you are in the right job.
Professions that are covered by these deals are accountants, doctors, dentists, solicitors, but some include opticians, vets and even teachers. These are all regarded as stable professions where salaries may not be huge to start with, but climb significantly over time. This means that, to lenders, people in these professions are a good bet.
There are some related deals that actually offer more money than the price of the property – 115% with Accord, and 110% at Scottish Widows. Obviously the extra money assists with the purchase of a first property, including legal fees, valuations, stamps duty and moving costs.
It’s not all as easy as it sounds, however. The extra 10% from Scottish Widows comes at a higher variable rate, and has to be repaid over a shorter time span of only ten years. Also, a 100% loan gives no buffer for falling house prices - a very real possibility in the coming months, given reports that house prices are over-inflated in the UK. Of course, that bad news has to be considered against the advantage of being able to buy a house earlier in the case of rising house prices and the very real prospect of further interest rate rises in the coming months.
Another advantage to these “professional” mortgages is the amount that lenders seem willing to lend. In the expectation that income for professionals will rise more sharply and have the bonus of better job security, banks and building societies will lend up to 5 times salary, compared with 4.5 for regular borrowers.
Some examples of deals available:
Newcastle Building Society has a 5.95% rate, fixed until 30 June 2012, with a maximum loan-to-value (LTV) of 100%, for an arrangement fee of £300.
Bristol & West Building Society is offering a 6.15% fixed rate until 31 August 2012, with a maximum LTV of 100%, and a fee of £399.
Standard Life Bank’s offering is a 6.23% rate, fixed to 30 September 2010, a 100% LTV and a fee of £299.
Accord has a fixed rate of 6.79% until 1 September 2012, with a maximum LTV of 115%, and a larger fee of £795.
None of these examples has a higher lending charge for any part of the loan.
Scottish Widows Bank has a variable rate on offer, last week at 5.84% - it is bas rate plus 0.34% (so it has just gone up to 6.09%), with a maximum LTV of 110% and an arrangement fee of £995.
These are good offerings for young professionals if they want to avoid paying a deposit. However, the ability to pay a 10% deposit would open up a much wider range of options.
The advice, as for everyone, is to not borrow more than you can afford, and that includes building in at least another quarter point base rate rise if you’re not going for a fixed rate.
19th July 2007
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