Guarantor Mortgage Becoming Obsolete?

It has emerged that the Halifax intends to withdraw its guarantor mortgage from the market in March, currently being offered by brokers.  A guarantor mortgage is a deal where a person (usually a close relative) guarantees to repay the mortgage if the borrower is not in the position to, or refuses to. A guarantor mortgage is usually entered into when the borrower is unable to borrow enough to buy the home, but a guarantor will step in once assessed and able to support the new mortgage on top of their financial commitments.  These deals usually taken out for first-time buyers using help from their parents.



Halifax is reported to have said the demand for a guarantor mortgage has dwindled away enough to withdraw it.



The guarantor mortgage will be replaced by the Lend A Hand mortgage deal initially offered by LloydsTSB and will be exclusively available in branch.



The main difference with this deal is that the borrower only needs 5% deposit and the guarantor has 20% in a tied savings account, borrowers can access the rates available to someone with a 25 per cent deposit.  Meanwhile the guarantor continues to earn interest on those savings.



There is an opportunity for the guarantor to be released from the deal after 42 months as long as all the payments have been met and the outstanding balance is less than 90% of the market value at that time.



A spokeswoman for Halifax, says: “We were a strong supporter of the first-time buyer market in 2009, representing nearly 50% of the shared equity, shared ownership market and driving new innovation like the Lloyds TSB Lend a Hand scheme which enables customers to get 95% lending through taking a charge on a parent or grandparents savings account.



“This drive continues in 2010 as we look to provide more support in new build and find ways to extend the Lend a Hand activity which already accounts for a third of first-time buyer lending in the LTSB channel.



“Given this new activity we are finding that the demand for guarantor mortgages is reducing and now represents a tiny proportion of new businesses.”

Related posts:

1. Guarantor Mortgage – What is a guarantor mortgage?
2. 95% Mortgage – Getting A 95% Mortgage Today
3. Offset Mortgage – what is an offset mortgage?
4. 90% Mortgages – Current Pick Of 90% Mortgages
5. 100% mortgages – Current State of 100% Mortgages