by Mark Johnston
Barclays Reduce Family Springboard Mortgage Rate.
The Funding for Lending scheme has prompted a mortgage price war with several lenders slashing their rates in recent months. However, much of the strongest competition so far has been to attract borrowers with bigger deposits.
As the cost of fixed-rate mortgage deals continues to fall, lenders are slowly starting to offer more competitive deals to those with smaller deposits.
Recent figures from the Council of Mortgage Lenders (CML) show that lending to first time buyers has reached its highest point since 2008, but it still way off the figures seen in 2007. In 2007, 308,400 first time buyers obtained a mortgage, compared to 175,700 last year.
The struggling first time buyer market received a welcome boost back in January this year when Barclays launched a mortgage that allowed family members to use their savings to help first time buyers on to the housing ladder.
Data revealed that only 34 per cent of first time buyers in the UK were able to buy their home without any extra help last year.
For first time buyers having a guarantor can often mean they are able to get on the property ladder, borrow more than the bank normally would allow and their criteria is often less harsh.
The ‘family springboard’ mortgage is available to borrowers with a 5 per cent deposit. A family member must deposit 10 per cent of the purchase price in a specific Barclays savings account.
This therefore means that the home buyer can be then offered a 95 per cent loan to value (LTV) mortgage.
The family member will get their savings back after three years, if all of the mortgage payments are met, and receives interest at an annual equivalent rate of base rate plus 1.5 per cent.
It is fixed rate deal for three years at 4.69 per cent, reverting to a lifetime tracker at base rate plus 3.99 per cent, and there is also a £499 fee.
However, just recently Barclays has announced that it will cut its Family Springboard mortgage by 0.7 per cent meaning that the rate for the deal will become 3.99 per cent instead of its original 4.69 per cent.
Barclays managing director of mortgages Andy Gray says “We recognise the challenges facing first time buyers, which is why we have focussed on making the biggest changes in this area.”
Charlotte Nelson of financial comparison site Moneyfacts.co.uk , says “These guarantor mortgages have increased in popularity over the past few months with more lenders introducing this type of mortgage to their ranges.”
The new rate follows the success of the Family Springboard mortgage at the Legal and General Mortgage Awards last week, where it helped Barclays win Best Lender for Innovation.
At its original launch, Ben Thompson from the Legal & General Mortgage Club said “The launch of this scheme, available more widely and on more competitive terms than some might have speculated prior to its launch, will serve as a cattle prod to other lenders that have become comfortable lending to low risk borrowers only”.
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