After the banking crisis of recent years the idea of a 5% deposit at one stage looked unlikely to return to the mortgage market, but this week Barclays announced the return of the 0% deposit mortgage for home buyers. Sounded great as a headline, but there’s a catch!
The 0% deposit is available when using the, “family springboard” mortgage, meaning that no deposit is required when a “helper”, most likely the home buyer’s parents, put cash equating to 10% of the house purchase price into a savings account linked to the mortgage. Thus it requires input from the Bank of Mum and Dad (BoMaD).
The good news is that the cash will be returned to the parents after three years with interest added, provided the borrowers have kept up with their mortgage repayments. Suggesting that answering to parents is a greater incentive than answering to the bank. Together with this new initiative, the bankers also increased the maximum amounts that home buyers can potentially borrow as a multiple of their income to 5½ times their income up from the maximum multiple of 4.4 as previously was the case.
The parents putting cash into the “helpful start” account will receive an interest rate under the deal of 2%, based on the Bank of England base rate plus 1½%.
So in this segment, we ask the question how much does this really help home buyers, and does the removal of the hefty mortgage deposit really make a difference, when there’s a dependency on the Bank of Mum and Dad (BoMaD) to fill the gap.
Take a listen to learn more: