Gen H has launched a part capital repayment and part interest only mortgage product aimed at supporting first-time buyers with small deposits.
This mortgage can be taken out with a deposit of just 5 per cent and borrowers take up to 80 per cent of their mortgage on an interest only basis.
The remainder of the mortgage is taken up on a capital repayment basis and will mean that customers own 100 per cent of the property from the first day and can overpay to reduce their capital balance.
Buyers will need a household income of at least £50,000.
Gen H chief commercial officer, Pete Dockar, said: “For most people, that path to home ownership isn’t straightforward.
“In a country where the average house price is eight times the average salary — to say nothing of places like London — the best mortgage products are those that can be carefully tailored to suit the needs of individual buyers.
It primarily helps buyers who are already in the market but currently miss out on affordability, rather than creating a wave of brand-new demand
“Part and part mortgages do exactly that. No more renting. No need for family help. And unlike shared ownership, there’s ownership, there’s no staircasing, no frustrating administration, and no rent to be paid, just 100 per cent home ownership from day one.”
Gen H pointed out part and part mortgages are able to provide borrowers with flexibility as they can add an interest only portion to their mortgage to maximise their affordability.
Conversely, buyers who want an interest only mortgage but do not quite have the full repayment strategy sorted can top up with a capital repayment portion to make the numbers fit.
Risk exists
John Charcol mortgage technical manager, Nicholas Mendes, said while Gen H’s product is not inherently dangerous, a risk does exist in the use of its interest only element purely to stretch affordability without a realistic repayment strategy.
“The key is making sure borrowers understand that the interest only portion does not disappear and that a plan is in place to pay it down over time,” he said.
“This kind of product is more likely to support transactions than to push prices materially higher.
“It primarily helps buyers who are already in the market but currently miss out on affordability, rather than creating a wave of brand-new demand.
“If adopted widely it should improve liquidity at the first-time buyer end of the market, but it is unlikely on its own to drive a significant house price acceleration.”
tom.dunstan@ft.com
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