Barclays has today become the first high street lender to offer a 100% loan-to-value (LTV) mortgage since the financial crash, allowing first-time buyers to borrow the full value of a property.
Buyers earning at least £50,000 will be able to borrow up to five and a half times their income, while those on lower salaries can borrow up to 4.4 times their annual earnings.
However, under the ‘Family Springboard Mortgage’ a guardian or family member (or the borrower themselves) must deposit at least 10% of the property's value into a linked savings account.
Through this arrangement, supporting family members will get their money back once the three year fix ends, plus interest of 1.5% on top of the Bank of England’s base rate - meaning you’d currently earn 2%.
It’s not technically a guarantor mortgage, as the supporter has no claim on the property, but their money is at risk if the borrower falls behind on their payments.
Barclays says a third of first-time buyers currently rely on contributions from family members to get onto the property ladder, and a fifth of these people see the money as a gift, rather than a loan.
New research published this week also reveals that the ‘Bank of Mum and Dad’ is now a £5 billion mortgage lender.
Raheel Ahmen, head of Barclays mortgages says: “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.”
Barclays’ offer is considerably more attractive than the only other 100% loan-to-value deal on the market, available from Aldermore.
Barclays’ Family Springboard Mortgage charges interest at 2.99% fixed for three years with no upfront fee. Someone borrowing £250,000, repaid over 25 years will pay £1,184 a month and £28,416 over the first two years. After the initial period, the mortgage reverts to a lifetime tracker that’s 2.49% over the base rate, which is also 2.99%, for now.
Aldermore meanwhile, charges 5.68%, fixed for three years, providing they can find a guarantor. Someone borrowing £250,000 over 25 years will pay £1,562 a month – that’s £9,072 more over two years than Barclays’ new deal, even before considering up-front fees of around £1,600.
Borrowers with a 5% deposit can also get Barclays’ Springboard mortgage at 95% LTV. Here you’ll be charged a lower 2.79%, also fixed for three years with no arrangement fees.
Borrowing 95% of a £250,000 property over 25 years will cost £1,125 a month and £27,000 over the first two years. The standard variable rate is also 2.49% over the base rate (currently 2.99%).