British Property Award Winner 2017 & 2018
Deposit-free mortgage will provide a further boost for first-time buyers to take their first steps on the housing ladder.
First time homebuyers will be interested to learn that 100% mortgages are set to hit the market later this year, in a sign that restrictions on mortgages are set to be further eased.
These “deposit-free” mortgages, currently only offered by Barclays, are called the Family Springboard mortgages and require a “helper contribution” of 10% of the purchase price, emphasising the vital role the “Bank of Mum and Dad” continue to play in the market.
However, it’s important to understand that these new mortgage products still require a security behind them, so differ from the 100% mortgages on offer before the credit crunch. The “springboard” aspect of these products is key and the need for a security behind the product is something that has often been overlooked in the press.
The helper, who would typically be one or both of the parents of the borrower, must deposit 10% of the whole purchase price in a Barclays account. After three years, if the mortgage payments have been kept up to date, the money is returned to the ‘helper’ with interest.
A previous survey from late 2015 suggested that half of potential homebuyers would welcome a return to 100% mortgages.
Stephen Ludlow, Chairman at ludlowthompson, comments: “Tough borrowing conditions and high house prices have meant that most first-time buyers needed to build up a substantial deposit to purchase a home.
“For some individuals, the end of 100% mortgages after the credit crunch meant they had to live at home or stay in a flat-share for years before they would enter the property market.
“By reintroducing 100% mortgages, lenders can assess borrowers solely on their income and future earnings potential, although some help from the ‘Bank of Mum and Dad’ will still be needed. It will be interesting to see if others follow Barclays’ lead.”
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