Barclays new low deposit mortgage – with help from Mum and Dad

Learn more about Barclays Family Springboard and other mortgage schemes that help with that deposit - with advice from our expert David Hollingworth, Director of the award winning mortgage broker's London & Country Mortgages

January 14, 2013

The Barclays Family Springboard mortgage which launches today is another option for borrowers struggling to raise a deposit.  Using cash from a parent as additional security, it enables Barclays to offer a mortgage of as much as 95% of the purchase price to their child. Parents put down capital worth 10 per cent of the value of the home so that their children only have to come up with 5 per cent in a cash deposit. The buyer would be locked in to a three year deal at 4.69%.

Another key benefit that will attract parents is likely to be the fact that they can keep their savings in their name rather than gifting them to their child.  That may be preferable if they want to access the cash later or don’t want to gift the cash, for example if their child is buying with a partner. The parents’ savings would attract interest at the base rate plus 1.5 percentage points and after 3 years of mortgage payments they will have the cash at their disposal again.

The fact that it is not only available to first time buyers is a benefit too, given the fact that second or third time buyers may be finding things tough as well.  So while parents may not be keen to gift more cash this gives them the option of utilising their money to assist their children moving up the ladder.

With high LTV lending a thing of the past, lenders have had to be a bit more innovative and recognise the role of the parents in most first time buyers’ hopes of buying their first property.  The use of parental assets, either cash or spare equity, as additional security is something that we’ve seen before. People looking at this type of mortgage structure will want to also look into:

–       National Counties Family First uses a collateral charge on spare equity – 2 year fixed rate at 4.89% to 95% LTV with a £495 fee.

–       Aldermore Family Guarantee Mortgage also uses a charge on parental property – 2 or 3 year fixed rate at 5.98% to 100% LTV with a £1298 fee.

–       If a FTB actually had a 15% deposit to put down Leeds BS offers a 3 year fix at 3.69% through mortgage brokers to 85% LTV with a £999 fee

–       In terms of standard products in the open market it’s difficult to directly compare any of these deals as there is more security but to give some context Melton Mowbray offers a 3 year fixed rate at 5.49% to 95% LTV with a £998 fee.

–       The Lloyds Lend a Hand deal which works in a similar way. Crucially though, the Barclays scheme requires parental cash of 10% of the property price to be locked down in a savings account as security, rather than 20% with Lloyds, making the Barclays product more accessible.

This is all good news for aspiring and existing homeowners – and their parents – and goes some way in providing a solution to the current problem of high deposits. But watch this space – with more competition in the market it’s hoped that there could be more lenders looking to provide deals for those with small deposits.

David Hollingworth  

Associate Director, London & Country Mortgages

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