Family Building Society opens for business
Its primary product is the Family Mortgage, which enables first-time buyers to pay a lower rate offset by the security of deposits from other family members such as parents, grandparents or other relatives.
Also available is a Low Start Mortgage aimed at borrowers struggling with changes to their financial circumstances. This could be from life events such as divorce or having to take time off for maternity or paternity leave.
The building society is also releasing savings and later life products, with the latter dealing with equity release, care fees planning and assisted home sales.
Mark Bogard, chief executive of the Family Building Society, said: “This is an entirely new, focused and joined up development in financial services that is designed to meet the changed financial landscape and a dependency on each other, for the family.
“Unlike the big banks, we don’t want to be all things to all people. We just want to serve families with particular needs, really well.
“We are living longer and need to provide for old age care. Parents want to support their children into independence but have their own needs to consider.
“Young people want independence but often have student debt and find it hard to save for a deposit. Also they don’t want to be a further burden on their parents.”
With the Family Mortgage relatives can have an interest-paying savings account known as a Family Security Account, which provides security for the borrower as long as they can find a 5% deposit.
A second choice enables family members to deposit interest on savings, with the mortgage holder only paying interest on their mortgage minus the deposited money. The family member’s savings, which are placed in a Family Offset Account, can be reclaimed after 10 years.
Another option, designed for families who are asset rich but cash poor, allows relatives to place a charge on their house to reduce the necessity for a larger deposit for the borrower.
All three options can be used in combination.
A protection feature is included, as if the holder loses their job through no fault of their own their share of the mortgage will be paid for up to six months.
The Low Start Mortgage offers borrowers stepped monthly payments which are low for the first two years of the mortgage term.
For the first six months the rate is fixed at 1.39%, while payments for the rest of the year stand at 2.69% – both being interest-only.
For the second year interest-only payments are fixed at 5.39%, while capital is repaid from the third to fifth years.
After the 5-year period the mortgage moves onto a variable rate of 4.79% for the remainder of the term.
Using the product the minimum property value is £125,000 and the minimum amount a buyer can borrow is £45,000.
Bogard 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.”