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Families help first-time buyers with offset mortgages

12 February 2005
Families should stick together to help first-time buyers with offset mortgages, a leading finance industry figure has advised.

Ray Boulger, senior technical manager at independent mortgage brokers Charcol, cited family offset mortgages as one viable answer to the problems which currently beset first-time buyers.

A family offset mortgage works by offsetting the amount of savings a family has against the outstanding mortgage, before calculating the monthly interest payment.

No interest is received on the savings but the total debt has a lower interest charge.

Another incentive is that parents who may not be able to offer their children a lump sum because of pension concerns can still help out.

"You could argue that it's suitable for parents who don't need that money for a while but don't want to yield control of it, especially if, for example, as a result of poor pension funding they will need to rely on their savings later on," Mr Boulger told Reuters.

The proportion of home loans going to first-time buyers dropped to 26 per cent in 2004 from 38 per cent in 2002, the Council of Mortgage Lenders revealed last week.

Offset family mortgages are one way to help first-time buyers overcome growing affordability problems.

Building societies currently offering this type of mortgage include the Woolwich, Newcastle Building Society, Cheltenham & Gloucester and Northern Rock.

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