The Family Building Society, which launched on 14 July, is offering the Low Start Mortgage, aimed at borrowers who are faced with significant changes to their financial circumstances.
Faced with domestic upheavals such as divorce or taking time off for maternity or paternity leave, borrowers may take advantage of stepped monthly payments which are very low for the first two years of the term of the mortgage.
There are five steps:
- for the first six months the rate is fixed at 1.39% and is interest only,
- payments for months 7 to 12 are also interest only with the rate fixed at 2.69%,
- for the second year the payments are still interest only, yet fixed at 5.39%,
- and move to repayment of interest and capital for the third to fifth years,
- before moving to a variable rate of 4.79% for the remainder of the term.
The combination of low rates in the first year with no capital repayments for the first two years is deliberately designed to keep payments low as borrowers adjust to their new financial circumstances.
The minimum property value is £125,000 and the minimum amount a buyer may borrow is £45,000.
Mark Bogard, Family Building Society chief executive, said: “The pattern of family life is rarely smooth for long, and every year many thousands of families hit serious turbulence. Big changes in one’s life can lead to complications with household budgets – particularly when you are faced with both expected and unexpected loss of income.
“We have conducted extensive market research and we believe that there is a firm requirement for those borrowers facing challenging finances for a product like our Low Start Mortgage. The reaction from intermediaries has been very positive, too.”
