Students who would otherwise have to rent are the target market for a new mortgage deal aimed at getting those over 18 on the property ladder. Photograph: Getty Images
Anyone over 18 who is in higher education can apply for the deal, as long as they have backing from family
After three or four years of study, many students will look with resignation at bank statements showing them thousands of pounds in debt. Raising enough for a deposit on a first property becomes a a distant thought as they tackle paying off their loans. Unless, that is, they are homeowners already.
Lenders are now looking at students as not just customers for university loans, but also for early mortgages – effectively turning them into landlords.
The new “Buy for Uni” mortgage from The Loughborough Building Society promises up to 100% financing for a property purchase, as long as close relatives provide security. A similar product has been on offer through Bath Building Society for some years, but both have been met with calls for caution by students’ representatives.
Under the Buy for Uni deal students who are over 18 in higher education in England and Wales can get a loan for up to £300,000 as long as the property is within 10 miles of where they study.
Behind them must be members of their immediate family – parents, step-parents or grandparents – who can provide security in cash or equity in a property, such as the family home, if the loan is for more than 80% of the value of the property. Interest rates range between 4.54% and 4.74% depending on what security is provided and the term of the mortgage.
Chief executive of the building society, Gary Brebner, says the mortgage acts as a gateway product to get on the property ladder. After the three- or five-year term, when the student will have graduated, it is expected to change into a more traditional mortgage.
Unlikely as it is that minimum wage shifts in the students’ union bar will cover the repayments, the student instead becomes a landlord, earning money from the spare rooms by renting them out.