The return of the 100% mortgage
One of the biggest stumbling blocks for people looking to buy property in recent years has been the need to save up as much of a deposit as possible. Since the financial crash, mortgage lenders have been reluctant to provide a 100% mortgage but this has recently changed with Barclays announcing a new deal which provides buyers with the chance to arrange a loan without having a deposit in place.
Until this change, lenders have been looking for at least a 5% deposit from lenders but the new arrangement from Barclays, which is a 3 year deal, provides buyers the chance to borrow at a 2.99% fixed rate without having to offer a deposit.
Barclays have potentially changed the property market
As you may expect, there is a catch but it shouldn’t be insurmountable to many would-be buyers. The company is looking for customers, their friends or family members to place 10% of the value of the property into a Barclays saving account for these three years. When the three year period is over, the money, plus interest at a level of 1.5% above the base rate, will be returned.
This new offering comes about due to changes in the Family Springboard Mortgage offered by Barclays. This used to require a 5% deposit and there is also a change with the fact that buyers who earn more than £50,000 per year can borrow 5.5 times their salary, which is a rise from the previous 4.4 level.
This move has been heralded as a positive step and it should be of great significance to buyers who haven’t had the time or opportunity to save up a suitable deposit. There is also comfort for parents who are keen to help their children get on the property ladder but who didn’t want to pass up a great deal of their savings. The requirement to place money into a savings account means that there will be a return for anyone that helps their children or relatives out in this manner.
Various studies indicate that the deposit is the most substantial barrier to youngster getting on to the property ladder. In announcing these changes, Barclays also released figures that suggested 56% of single and young people cited issues with a deposit as a key factor stopping them from buying a home. 28% of first time buyers also cited this issue and the company also reported that 35% of young customers currently without a mortgage were looking for assistance from family members to obtain a loan.
With Barclays having made this move, attention will now fall on other lenders and whether they will follow suit. Anything which makes it easier for first time buyers to obtain a mortgage should be seen as a positive step for the market. This sort of move, if picked up by other firms, should have a greater impact on the property market than any of the stamp duty or taxation changes implemented by the government in recent times.