Racial insensitivity and cultural appropriation have left members of the team feeling ‘ostracised’Written by Grace Duncan on 16th May 2018
‘Buy for Uni’ Mortgage Introduced
Students are now given the chance to 'Buy for Uni' with new mortgage opportunities
The Loughborough Building Society has launched a new 'Buy for Uni' mortgage aimed at university students who wish to own, rather than rent, property. The Building Society becomes the second lender of this niche loan, as it joins Bath Building Society in offering students to become landlords.
With graduates struggling to build up a deposit large enough to buy a property, the scheme provides university students in England and Wales with the opportunity to own a home before student debt has accumulated.
'Buy for Uni' effectively turns students into landlords, as they can rent out spare rooms. The aim is that the money earned on rent will cover more than the commitments on the loan.
Interest rates on the loans range between 4.54% and 4.74%, depending on the security and terms of the loans, which is higher that usual for first-time buyers.
Chief executive of Loughborough Building Society, Gary Brebner, says that the rent earned on spare rooms should also cover a potential rise in interest rates, or that the guarantor will step in if the student is unable to meet these commitments.
“‘Students should be careful of offers that seem ‘too good to be true’
The scheme offers loans up to £300,000, and finances up to 100% of the property. Close relatives - parents, step-parents or grandparents - have to provide security if the loan is for more than 80% of the value of the property. This requires the student's close relatives to have a substantial amount in cash or in equity on their own home.
The Bath Building Society has had a similar scheme going for nine years, with a loan-to-value ratio of 75%. Chief Executive of the Bath Building Society, Dick Jenkins, says that the default rates on these loans are much lower than on typical mortgages. They have not encountered problem cases.
The security required from close relatives in both schemes implies that the loans are targeted at students from wealthier families, with sufficient value in either cash or equity in the family home.
Students' representatives are urging students to be cautious about the loans, making sure they are aware of the hidden costs and terms involved.
Vice President for welfare at the National Union of Students says: ‘Students should be careful of offers that seem ‘too good to be true’. Buying a house will usually involve significant hidden costs for deposits, agents and surveyors, even if the monthly payments seem to compare well with rented properties’.