By Laura Whitcombe For Thisismoney. First-time buyers without a deposit could now be able to take out a mortgage with Barclays, it announced today. But there's a pretty big catch - their parents need to pay a 10 per cent deposit into a related savings account the Helpful Start Account and leave it there for three years to act as security for the home loan. The offer is the first time a major lender has offered a per cent mortgage since before the financial crisis.
Accepted buyers will be able to take out a three-year fixed rate deal at 2. Until now, buyers have had to put down a deposit of at least five per cent of the purchase price, in addition to anything lent or given by family members. The decision to scrap the deposit requirement is part of a series of enhancements to the Barclays Springboard Mortgage, which was originally launched three years ago to enable parents to help their children buy a home without having to gift a deposit.
If you parents have significant savings, they could put them to work in a savings account that gets you a deposit-free mortgage. Up until now, the parent had to contribute savings equal to 10 per cent of the purchase price into a related account for the three years for which the mortgage was fixed and the borrower had to contribute a further 5 per cent deposit.
So the bank had security of 15 per cent of the purchase price while giving the buyer a 95 per cent LTV. The rate the Springboard Mortgage originally came with was 4.
With the new improvements to the mortgage, including the 2. However, in launching the product 'enhancements', Barclays has increased the mortgage rate from 2. And if a borrower misses a payment, the bank can hold on to their parent's money for longer than initially planned. Furthermore if they can no longer make their mortgage repayments, Barclays will keep the money in the Helpful Start Account.
Barclays has ditched the 5 per cent deposit contribution requirement on its Springboard mortgage. Aaron Strutt from mortgage broker Trinity Financial said: However, for borrowers who can get together a deposit of 10 per cent - either on their own or with help from family - there are better rates available than the Barclays Family Springboard's 2. The Loughborough Building Society has a 2. The rate then reverts to 4.
And the Post Office has a three-year fix at 2. And Barclays' own Woolwich mortgage arm matches the Springboard's three-year fix of 2.
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However, unlike the Springboard mortgage, all three of these deals come with fees. Barclays Mortgages recently found that 35 per cent of prospective first-time buyers are forced to ask their parents for help to get a mortgage, with 20 per cent of them receiving a gifted deposit.
Raheel Ahmed, head of Barclays Mortgages, said: We want to offer more people a way to get on the property ladder and to walk through the door of their first home earlier than they perhaps thought.
What other help is available for first-time buyers? Wealth manager St James's Place has just teamed up with Metro Bank to offer an 'Intergenerational Mortgage Range'. Similar to the Barclays Family Springboard deal, the range includes a 'Secured Deposit Account' into which relatives can contribute their savings in order to give their family member's loan more security and help them get a better rate. But unlike Springboard, the Secured Deposit Account pays no interest.
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Mortgage rates depend on deposit and Secured Deposit Account Contributions and start from 1. This mortgage payment calculator will allow you forex v latvii see the effect of sneaky arrangement fees on your repayments. Use the second part of the calculator to compare deals. Find out monthly payments and compare the cost of mortgages over the initial deal period including arrangement fees.
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