Post Office launches new mortgage to help first-timers onto the property market

The Post Office has launched a new mortgage product to help first-time buyers onto the property market, with a little help from Mum and Dad.

Called the Family Link mortgage, buyers can borrow 100% of the property value via the creation of two mortgages – a traditional 90% mortgage against the purchase property and a 10% security loan against the parent’s house.

The 90% mortgage is to then be paid back as standard, charged at a rate of 4.89% locked in for five years. The 10% ‘loan’ must be paid back over five years although no interest is chargeable. Naturally, the parent’s property could be at risk should payments default.

On the scheme, David Hollingworth of mortgage brokers L&C said: “Using spare equity rather than gifting or locking down cash is a useful alternative, especially as some will not have large lump sums of cash but may have benefited from house price growth that means they do have spare equity.”

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“The Post Office approach enables the child to borrow 90pc against their new home but another 10pc is secured against the parental (or close relative’s) home. This is in the child and parent’s names but the first-time buyer will make payments on both elements.”

So what does the scheme look like in practice?

If the first-time buyer secured the Family Link mortgage against a property worth £200,000, the new homeowners would be looking at paying £1,041 for the primary mortgage and £333 a month for five years to pay-off the 10% loan secured against the parent’s home.

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Whilst 90% mortgages secured with a more traditional 10% deposit tend to offer more competitive rates, such family offset mortgages do offer a promising alternative to potential first-time buyers looking to get onto the property market without much personal or family financial backing.

Plenty of support for first-time buyers

first time buyer mortgage

It’s not just through the availability of 100% mortgages that first-time buyers are being supported in taking their first step on the property ladder. In the Autumn budget, Chancellor Philip Hammond also announced that Stamp Duty would be abolished for new buyers up to the value of £300,000, with reductions up to the value of £500,000 also included to support purchases around London.

Around 20,000 buyers are expected to have benefited as a result of the changes with over one million expected to be helped over the next five years as a result of the scheme.

Read more about the stamp duty changes and new rates for first-time buyers here.