The society that likes to say yes
After years of being priced out of the housing market newly qualified teachers and those on lower salary scales are being helped at long last to take the first step on to the property ladder.
For the Teachers' Building Society (TBS) has set aside up to Pounds 3 million to fund its new 100 per cent mortgage scheme aimed at those in the profession who cannot afford to put down a deposit on a home of their own.
When the property market was booming 100 per cent mortgages were commonplace, but since its collapse most building societies have demanded deposits from would-be purchasers in an attempt to limit the risks they are taking.
Now only one other society, the National and Provincial, is believed to offer 100 per cent mortgages.
Hugh Nichols, assistant general manager of the TBS, feels that the time is right for the society to take the plunge and launch its endowment mortgage scheme following careful monitoring of the property market.
He explained: "It seems to me that prices have reached their nadir and levelled out, and with teachers in regular employment and prices as low as they are we could help the profession. So many teachers can only afford to rent. "
Unlike many building societies, the TBS is also willing to lend to those on temporary contracts - provided they have at least six months to run on a one-year contract.
Although many teachers' salaries are in the Pounds 16-Pounds 18,000 range, the TBS has fixed its upper borrowing limit at Pounds 80,000, repayable over 25 years at a variable interest rate which currently stands at 8.6 per cent (APR: 9.2 per cent).
Normally the society would offer a mortgage based upon three-and-a-quarter times a single salary, or three times the sum of the joint salaries.
This would mean the gross repayments on a typical 100 per cent mortgage for a property of Pounds 40,000 over 25 years would be Pounds 286.67 a month (or Pounds 243.67 if the account is in the MIRAS system where tax relief is applied at source).
The total amount repaid on the Pounds 40,000 loan under these terms would be Pounds 127,179.59. "This looks like an awful lot of money," admitted Mr Nichols. "But after renting for 25 years the figure would probably be more and you would not own your own property."
Borrowers who take out a mortgage with a loan in excess of 75 per cent of the purchase price also pay a fee at a rate of 8 per cent on the last 25 per cent of the loan "to cover the increased risk".
"This is a reasonably competitively priced fee, it is either average or slightly better compared to the rest of the market-place, and it is required by law to protect our investors and give us cover," he added.
Set up in December 1966, the TBS now has 2,500 borrowers - mostly members of the National Union of Teachers - and more than Pounds 100 million in assets. And despite the precarious nature of 100 per cent mortgage schemes the society is confident it has minimised the risks involved as much as possible.
Mr Nichols said it anticipated a big demand from young teachers. While acknowledging that its ceiling of Pounds 80,000 may make it difficult for young teachers with families to buy suitably-sized homes in London and the South-east, he said: "This is a national figure and our idea was to give a helping hand on to the first step of the property ladder to those who otherwise would have difficulties.
"At the same time it could also help a lot of schools who cannot otherwise attract teachers to the area because they cannot afford to buy a property. "
Further information about the Teachers' Building Society's 100 per cent mortgage scheme can be obtained by calling 0800 378669.