Member Article

The return of the 0% deposit mortgage

First time buyers rejoiced over the news that Barclays are now offering a 0% mortgage for the first time since the financial crisis.

The Bank of Mum and Dad

The mortgage, dubbed the “Family Springboard” mortgage, removes the need for a deposit to be put down on the purchase of a property. Previously, Barclays required a minimum deposit of 5% to be put down, with a further 10% of the house purchase price to be fronted by a “helper” – usually a parent.

This 10% would sit in a savings account linked to the mortgage for a minimum of three years, as a form of advance guarantee for the buyer. After the three-year period the payment would be returned to the “helper”, with interest added, on the provision that the mortgage payments are up to date.

Barclays no longer require the 5% deposit under the changes to the mortgage package, although the 10% “loan” is still in place.

More for your money

Barclays have also raised the maximum amount that buyers can borrow against their income. Those with an income of more than £50,000 will be able to borrow up to 5.5 times income, up from the previous limit of 4.4. This is the clearest indication yet that the banks are ready to lend.

During a recent survey conducted by Barclays, they found that 35% of first time buyers were forced to borrow money from their parents to cover the deposit. Of those, 20% saw the money as a ‘free gift’.

The benefit of choice

While the family springboard mortgage doesn’t require the 5% deposit it previously did, those that choose to pay the deposit will be rewarded with better rates. For example:

Deposit amount Three year fixed rate

0% Deposit 2.99%

5% Deposit 2.79%

Add to that the 2% interest rate the Bank of Mum and Dad will get from their 10% sitting in the “helpful start” account. The parents of the 20% who see the money as a free gift can breathe a sigh of relief knowing they will get their money back.

Pre crash return

With borrowing becoming more relaxed and major banks beginning to offer 0% deposits, things are looking up for first time buyers. Only time will tell if higher borrowing limits will be a help or hindrance to buyers who could be in over their heads.

This was posted in Bdaily's Members' News section by Kyle Daniels .