Barclays Mortgages has revamped its “family springboard” mortgage, removing the need for first-time buyers and home movers to put down any deposit at all when buying a home using this mortgage.
The deal has previously allowed people to climb on to the property ladder with a 5% deposit, provided that a “helper” – often the home buyer’s parents – puts cash equating to 10% of the house purchase price into a savings account linked to the mortgage.
Under the new deal, only the 10% contribution from parents is needed. This cash will be returned to the borrower’s parents after three years with interest added – provided the borrower has kept up with their mortgage repayments.
The lender has also raised the maximum amount that home buyers can potentially borrow as a multiple of their income under the deal.
Customers with an income of more than £50,000 will be able to borrow a maximum of 5.5 times their income, up from a maximum income multiple of 4.4.
Buyers can still put down the 5% deposit if they want to under the Barclays deal – and doing this will give them access to a slightly better mortgage rate.
A buyer with a deposit of zero could get a three-year fixed-rate of 2.99% under the family springboard mortgage, but one with a 5% deposit using the mortgage could get a cheaper three-year rate of 2.79%.
The revamp has also seen the rate on offer for people who do have a 5% deposit cut from 2.89% previously.
Parents putting cash into a savings account – called a “helpful start” account – will receive an interest rate of 2% (the Bank of England base rate plus 1.5% under the deal).
The need to raise a hefty mortgage deposit is often cited as a major barrier holding people back from getting on the property ladder.
The Government has introduced various schemes under the banner of Help to Buy, which enable people to move on to or up the property ladder with a 5% deposit. As well as offering the springboard mortgage, Barclays also takes part in Help to Buy.
Barclays said recent research found more than one third (35%) of prospective first-time buyers are forced into asking their parents for help getting a mortgage. Of these, one in five (20%) who accept help see the money as a “gift” that does not need to be paid back.
A separate survey from credit checking company Experian recently found more than one in four Britons aged 55 and over have given financial support to their child or someone else to help them buy their own property.
Some 27% of over-55s said they have done this – despite one in six (15%) of those who have supported someone else saying they are “not at all” financially comfortable themselves – Experian found.
Another report, from Legal and General, found the “bank of mum and dad” is expected to be involved in one in four (25%) property purchases in the UK housing market in 2016.
Rachel Springall, a spokeswoman for website Moneyfacts.co.uk, said that while some other lenders offer “guarantor” mortgages which are backed by a helper, Barclays’ large high street presence is likely to make it particularly attractive to those struggling to raise a deposit.
She said: “At 2.99% the three-year fixed mortgage is reasonably priced, but buyers must be aware that their parents or guardians must deposit the full 10% of the property price and they will not have access to this money for three years.
“Guarantor mortgages spread the risk among both the buyer and the depositors so they should not be taken on lightly.”
Ms Springall continued: “Anyone taking out a high loan-to-value deal would do well to make overpayments on the mortgage to reduce the loan and term of the mortgage.
“This way, when they look at re-mortgaging down the line, they will hopefully have more equity which means they will have more competitively priced deals to choose from at lower loan-to-values.”