A great result for graduates

Life is tough enough for young homebuyers but being a recent graduate can really add to the misery. The chances are you've never lived anywhere for more than nine months since leaving school, aren't on any electoral roll, have a pile of student debts and no employment history.

This is why many recent graduates find it so difficult to find a mortgage. Most lenders just don't want to know, but now Scottish Widows Bank and the student-specialist broker Endsleigh Independent Financial Services, have tailored a mortgage to solve the problems of the graduate with no deposit and no credit history.

"It's a 102 per cent loan, which enables the borrower to cover some of the other expenses involved in moving house," explains Elaine Etheridge of Endsleigh. "But the most important point is that we broker and investigate each applicant individually so that, even if they are not on the electoral roll and have outstanding student loans, credit card debts, and no long-term address, they can still get a mortgage.

"Most lenders use automated point scoring systems for assessing mortgage credit risk and, if you are not on the electoral roll, are likely to say that you don't exist so far as they are concerned. We are brokers and deal with a number of lenders but most require a deposit of at least five per cent. Scottish Widows doesn't, and the good thing is that it does look at the graduate's entire finances. Even a bit of overspending on the credit card will not necessarily disqualify you from getting a mortgage, so long as you have been employed for at least a year and you are now dealing with your [financial] situation." The Scottish Widows loan is not the cheapest on offer but it is still a very good deal for those who don't have a deposit. The interest rate is linked to bank base rate (currently four per cent but expected to rise).

You pay 0.25 per cent below bank base rate for the first six months, giving a pay rate of 3.75 per cent. It then rises to 1.25 per cent above base rate for the rest of the term. This would currently mean a pay rate of 5.25 per cent.

Homebuyers get a free property valuation up to £250 plus £150 towards legal fees. Graduates who use this scheme should shop around for a solicitor, or use one of the online conveyancing services which charge a flat fee, as £150 may not go very far. To qualify for the loan you must be more than 21, and have graduated from a recognised UK university within the past five years, and have been employed on a permanent basis in the UK in 12 months prior to your application.

Everything is dealt with on the phone or the internet (www.endleigh.co.uk), handy if you are working or find it difficult to attend lots of meetings.

Many young homebuyers are opting for very long-term mortgages to keep costs low, and there has been much publicity about 50-year home loans.

"Today, many lenders will grant a mortgage up to the age of 70 so a 25 year old can easily be signing up for a 45-year home loan," confirms Etheridge. "On a 50-year mortgage you obviously pay double the amount of interest compared with a 25 year home loan."

Lenders are also prepared to offer a loan on an "interest only" basis, leaving the borrower to decide how, and when, the mortgage will be paid off.