Halifax Guarantor Mortgages Withdrawn
Halifax is pulling out of offering guarantor mortgages, where parents could stand as security for first time buyers, thus assisting their children to get on to the property ladder.
The new strategy at Halifax is to offer parents the option of putting funds equal to 20% of their child’s mortgage loan into an account at Lloyds.
The Halifax guarantor mortgage currently allows first time buyers using their parents as guarantor to obtain a mortgage of around four times the parent’s income. If the child defaults on repaying the mortgage, the parents are liable to take up the debt.
The new move has been criticised as a means of drawing parents closer to Halifax, so that both Halifax and Lloyds can recruit them as customers and cross-sell other products.
This more restrictive lending policy by Halifax comes at a difficult time for first time buyers. The average price of property bought with a first time buyer mortgage in 2009 was almost £134,000, while the average deposit paid was £29,439.
As mortgage lenders have tightened up their lending policies, the average age of first time buyers who can buy without the financial assistance of their parents has risen from 33 to 37 since 2008.
If this upward age trend continues, it will not bode well for the first time buyer market. Lenders prefer to schedule mortgages for repayment before the mortgage holder reaches retirement age, and are progressively less comfortable offering mortgages to people of 40 and over.
