Friends join forces to get on property ladder

Thousands of first-time buyers who cannot afford homes in London are joining forces with friends in "mates" mortgages.

Britain's biggest bank, HSBC, said it has seen a 50 per cent rise in group loans.

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These allow up to four friends to club together in a single mortgage so that they can buy a property that would otherwise be way beyond their reach.

Research from the bank suggests that up to three quarters of first-time buyers would consider purchasing a property with friends.

Barry Blackshaw, senior manager of lending markets at HSBC, said: "We are addressing customer need.

"First-time buyers are increasingly unable to meet traditional lending criteria as a result of house-price growth.

"As prices are unlikely to fall any time soon, we are expecting this trend to continue."

Demand for the mortgages is likely to be particularly strong in London, where prices have soared in a miniboom in many areas this year.

Nationally, first-time buyers are having to borrow a record average of 3.21 times their incomes, according to figures from the Council of Mortgage Lenders.

Although group loans are still only a small proportion of total lending, the figure of 0.7 per cent last year was more than double the 0.3 per cent seen in 2000.

Other lenders to offer them include Abbey, HBOS and the Britannia Building Society.

Last month, Morgan Stanley launched a shared equity loan through its new lending arm, Advantage, which offers up to seven times
borrowers' incomes in exchange for a share of potential profits when they sell.

But there is also growing concern that solutions such as clubbing together could create problems.

Sue Anderson, of the CML, said: "This kind of offer can create unstable households, which could ultimately be bad news for the owners
and for the property market."

Keith Tondeur, of debt advice charity Credit Action, said: "They are building a housing market bubble but if the bubble bursts, millions of borrowers will be in trouble."