02 June 2009

Sale and Rent back...back?

Council of Mortgage data reports that gross mortgage lending fell to an estimated £10.4bn in April, 60% down on this time last year. April’s figure is down 9% from £11.4bn in March and 60% from £26.1bn in April 2008. These figures confirm that the market is still weak and, despite industry reports, lending is not increasing just yet.
Innovation is though! Lloyds TSB launched a new product this week. The ‘Lend a Hand’ deal offering first time buyers an ‘in’ to the property ladder with a 95% mortgage on an attractive rate of interest. Parents have to place an investment with the bank against which a legal charge is taken. The investment receives a fixed rate of 3.5% for 42 months. The combined savings and deposit from the purchasers must equate to 25% at the outset. Although this will not suit all first time buyers, it is a positive step forward.
The Sale and Rent Back sector (investors buy your property and rent it back to you) has received many derogatory press comments in recent times. However, with regulation of the sector due in July, the future should be ethical.
Sale and rent back will not be right for everyone, but it does provide a valid solution for homeowners facing repossession and who have exhausted every other option. A new company has recently launched in this sector and the founders have enjoyed many years experience in the mortgage market, most recently as lenders. Their model is based around the customer remaining in the home with the ability to buy-back the property at any time during the tenancy agreement (up to 5 years) and share in any increase in market value. Customers must take independent advice and there are no application or administration fees to pay. Customers can withdraw at any time before the sale of their property, at no cost. Valuations of the property are based on two independent assessments. This is a specialised market and we support its forthcoming regulation. Please call for more details.

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