Barclays has just started offering a 100 per cent mortgage (but bank of mum and dad is still required)
We all know how well 100 per cent mortgages worked before the financial crisis – but now Barclays has become one of the first lenders since the crisis not to require a deposit from first-time buyers. Well, sort of.
The lender said it has made changes to one of its first time buyer mortgages which means borrowers no longer need a deposit for its Family Springboard Mortgage. Essentially, then, it's a 100 per cent mortgage.
There is a catch, though: the buyer needs a so-called helper contribution, ie. a 10 per cent deposit from a relative or guardian, which replaces the original five per cent deposit required.
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After that, things get complicated: the contribution is then put into something called a Helpful Start account, which is linked to the mortgage. After three years, the money in the account is returned to the family helper with interest. So while the bank of mum and dad is still required to get started, they don't lose any money in the long-term.
The news comes the day after research by Legal & General and Cebr showed aforementioned lending facility now finances a quarter of all UK property purchases: yep, last year parents or family members funded 300,000 mortgages, worth £77bn.
Meanwhile, further research has suggested that in the capital, bank of mum and dad has become bank of grandma and grandad – with more than three-quarters of grandparents providing "some sort" of financial support for their children's children.
The mortgage is available at a three-year fixed rate of 2.99 per cent – while parents/guardians will get 1.5 per cent on their "contribution".
“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," said Raheel Ahmed, head of Barclays Mortgages.
"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.”