100 per cent mortgage for first-time buyers launched by Bath Building Society

First-time buyers desperate to get on the housing ladder can now apply for a new 100 per cent mortgage.

The Bath Building Society has launched the three-year fixed-rate mortgage, called the Parent Assisted Mortgage Scheme (PAMS), in an attempt to open the housing market to potential young buyers who cannot afford the high deposits required by many lenders.

The mortgage will allow first-time buyers to borrow up to £300,000.

The PAMS mortgage requires the parents of the buyer to provide a guarantee for the loan, and the society takes a charge over a proportion of the parents’ home.

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Bath Building Society’s chief executive, Dick Jenkins, claimed the 100 per cent loan made sense.

He said: “The 100 per cent PAMS is intended to open up home ownership to a wider demographic in a responsible, sensible way, giving young people the opportunity to enjoy the benefits of home ownership just as their parents did. This is also a sign of confidence that the housing market is starting to slowly recover and that first time buyers will be a part of that recovery.”

Figures released last month by Barclays found first time buyers were now facing an eight year wait to save a deposit large enough to get on the property ladder, with 60 per cent of would-be buyers asking their parents for financial help so they can get a mortgage.

The bank said the average deposit required to buy a home is now 20 per cent of the property price compared with five per cent in 1995.

Mr Jenkins said: “The bank of mum and dad has become a significant factor in the mortgage market over the last few years. This mortgage product builds on previous successes we have had with a 95 per cent Parent Assisted Mortgage and our Buy for Uni mortgage and gives parents a way of making the vital difference to their children’s future without having to stump up a large pile of cash. This is a much more efficient way of assisting children onto the property ladder than other schemes which require a huge cash deposit.”

However, Mr Jenkins said the new 100 per cent mortgage would not cause the same irresponsible lending which contributed to the recession.

He said: “Let me be clear this is not a return to the indiscriminate 100 per cent lending that was in vogue on the eve of the credit crunch. We will be assessing all applicants carefully to make sure the deal is right for them and that they are comfortable with how the mortgage works.

“On the experiences Bath Building Society has had so far, I don’t think this is unduly risky. The bond between parents and their children works in such a way that nobody wants to extend themselves beyond what they can afford.”