Barclays announced this week that its popular Family Springboard mortgage is set to become even more attractive to borrowers. Applicants will no longer be required to put down any deposit (previously they were required to put down 5 per cent of the purchase price) as long as parents or other family helpers lodge 10 per cent of the purchase price in a savings account with the lender. The borrower can take out a fixed-rate mortgage pegged at 2.99 per cent and providing they make the repayments, the parents get their money back after three years. In the meantime, they earn 2 per cent interest per annum.
While critics have argued that this is a return to reckless borrowing with a 100 per cent loan-to-value mortgage, the reality is rather different. Underwriting criteria is more stringent thanks to the Mortgage Market Review, which was introduced in 2014, plus there is a buffer of 10 per cent in the form of the parents’ savings.
Other lenders could well follow Barclays’ lead which will widen the options available to first-time buyers who can’t save up for a big deposit. However, they will still need to save up the costs of buying – stamp duty, mortgage valuation fee, legal costs etc – so they will need to make some financial commitment. The advantage from the parents’ perspective is that they can help their children onto the housing ladder but still get their money back at a later date.