Barclays Mortgages has updated its Family Springboard Mortgage, removing the need for borrowers to put down a deposit when purchasing a home.
Previously first-time buyers would be required to have a 5 per cent deposit, but now they only require a 10 per cent guarantee from a relative or guardian, effectively replacing the deposit requirement.
Income multiples will also be raised for Family Springboard Mortgage customers with an income of more than £50,000, moving up from a maximum of 4.4 times their annual income, to 5.5 times.
Family Springboard Mortgage
Family Springboard | Deposit (%) | 3 Year Rate | Follow on Rate (BBBR+) | Application Fee | Min Loan | Max Loan | Helpful Start Account |
3 year fixed | 0% | 2.99% | 2.49% | £0 | £5,000 | £500,000 | BofE + 1.5% |
3 year fixed | 5% | 2.79% | 2.49% | £0 | £5,000 | £500,000 | BofE + 1.5% |
With a Family Springboard Mortgage, the family member helping the first-time buyer opens a Helpful Start account linked to the mortgage into which they deposit savings equal to 10 per cent of the final price of the house.
After three years the money in the account is returned to the family helper with interest, at the Bank of England base rate +1.5 per cent.
Recent first-time buyer research carried out by the lender - based on interviews with 1,000 young un-mortgaged individuals - found 35 per cent of prospective first time buyers are forced into asking their parents for help when securing a mortgage. Of these, 20 per cent who accept help saw the money as a gift that did not need to be paid back, burdening parents.
Legal & General and the Centre for Economics and Business Research backed this up with a study earlier this week showing parents will lend over £5bn this year, providing deposits for over 300,000 mortgages and purchasing homes worth £77bn; putting the Bank of Mum and Dad among the top 10 UK lenders.
The Family Springboard Mortgage was designed to remove this issue.
Raheel Ahmed, head of Barclays Mortgages, said: “Buying a first home is a hugely important step in everyone’s life and one that has unfortunately become tougher for many in recent years.
“When Barclays originally launched the Family Springboard mortgage in 2013 we made the decision to help both homebuyers and the family who wanted to support their children, but couldn’t just give away large sums of money.”
The Barclays research also revealed 56 per cent of all young un-mortgaged individuals identified deposit issues as one of the key barriers preventing house purchase, while 28 per cent of respondents said saving for a deposit is the main barrier.
Jeremy Duncombe, director of the Legal & General Mortgage Club, called it an innovative scheme which will allow even more prospective homeowners to get onto the ladder.
“For family members too, this revision has benefits – allowing them to get credit interest on the amount they deposit, whilst protecting them from exposure to the increased Stamp Duty levies on a second property.”
He added that the UK is suffering from a severe housing crisis, which is ultimately impacting affordability. “The vast gulf between supply and demand must be bridged if the market is to return to health. Solutions need to be implemented that will produce concrete results and have a noticeable impact for buyers at all levels of the market.”
peter.walker@ft.com
