by Mark Johnston
Barclays Launch New First Time Buyer Deal.
In recent years the number of first time buyers in the market has fallen rapidly, this in part is thanks to tighter lending restrictions and high deposit requirements.
However, according to recent figures from the Council of Mortgage Lenders (CML) lending to first time buyers has now reached its highest point since 2008, but it is still much lower than the figures seen in 2007.
A report by the Centre for Economics and Business Research (CEBR) think tank revealed that in 2011 one in five home purchases by first time buyers would not have been possible without financial support of some kind from parents.
Therefore it appears that in a bid to help young people get a foot on to the property ladder Barclays bank has cottoned on to first time buyers reliance on their parents and is now offering a new deal to first time buyers in the form of their ‘family springboard’ mortgage.
This deal is a 3 year fixed rate at 4.69 per cent with a 95 per cent loan to value ratio, then after the fixed period ends the deal becomes a lifetime tracker at a rate of 3.99 percentage points above base rate. This comes with a fee of £499.
The ‘family springboard’ mortgage does however require parents or a family member to tie down 10 per cent of the property’s purchase price into a connected savings account that is until the fixed period ends.
For example, if the first time buyer wishes to buy a home for £160,000 they would need a 5 per cent deposit of £8,000; their family would therefore need to put £16,000 into the savings account.
While this product is very similar to the ‘lend a hand’ deal from Lloyds TSB which was launched in 2009, it does have some differences.
The main difference between the two deals is that the Barclays savings account pays base rate plus 1.5 per cent and the bank will also give the parents their money back with interest once the fixed rate period ends. That is however providing that the mortgage payments have been kept up to date.
Andy Gray, managing director of mortgages for Barclays, stated “we have listened to our customers and need to continue to drive confidence in the housing market”.
David Hollingworth, of London and Country mortgages, said “this scheme offers better rates than would be available to those who have just 5 per cent deposit and it also allows the bank of mum and dad to keep control of their savings”.
Ben Thompson. Managing director of Legal and General mortgage club, added “it is schemes like Barclays family springboard that address perhaps the most pressing market needs and contribute to the housing market actually growing in size which is desperately needed from both a consumer and economic viewpoint”.
Experts however warn parents that because of the nature of the product they should take full independent legal advice to make sure they fully understand the commitment they are entering in to.
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