SBS to help students on to the housing ladder

SCOTTISH Building Society (SBS) is to launch a new first-time buyer mortgage aimed at students using family support to get on the property ladder.

The deal is set to be unveiled next month but The Scotsman can reveal that the Helping Hand product will be strictly limited to students and requires parents to take a second charge on their homes.

It will be one of just a handful of guarantor products available after a series of the mortgages - under which the guarantor, usually a parent, has to cover repayments if the borrower goes into arrears or defaults - were withdrawn in the wake of the credit crunch.

The new SBS deal comes just weeks after it launched the Welcome guarantor mortgage, which offers first-time buyers in full-time employment a loan of up to 95 per cent provided a parent acts as guarantor.

Gerry Kay, chief executive of SBS, said: "Although the housing market is relatively stable at the moment, there are fewer lenders and the range of mortgage products available in the past has been drastically reduced."

The new product is a variation on the Welcome mortgage, with the main difference being that the Helping Hand mortgage requires a second charge over the parents' property.

"There are a lot of parents with a lot of equity in their homes and this is aimed at the student market because there is a lot of demand for it," said Kay. "We have seen providers pulling out of the guarantor market but we don't see it as a risky product."

He said the society was in a position to help first-time buyers because of the success of its savings products in attracting much-needed cash deposits. Its regular saver, which currently pays 4 per cent, has been particularly popular, and Kay revealed that around a quarter of savers in its fixed-rate products were from south of the Border.

"We have had a very good period and exceeded our expectations so we are cash rich. You don't have to pay the top rate to attract money. People are wary of going for fantastic rates if they don't know the brand."

The news comes just two days after new figures underlined the slowdown in the housing market. The Nationwide reported on Thursday that UK house prices fell by 0.5 per cent in July, while the Bank of England revealed that mortgage approvals fell in June to the second lowest level since May 2009.

And Kay said the housing market in Scotland remained significantly subdued, pointing to a wary mood among would-be buyers as a consequence of the uncertain economic outlook. "There is plenty of supply but not many buyers because people are holding back, especially in Scotland," said Kay.

"The economy in Scotland is lagging behind the UK and the prospect of public-sector cuts and unemployment makes people wary about committing."