Last week, Barclays updated their “Family Springboard” mortgage, in an initiative designed to help first-time buyers and home movers with the financial burden of deposits. With up to a 5.5x income multiple and 2.25%* interest available on the savings, Residential Broker, Ross MacTaggart, explains how it works and the potential benefits…
How does the Family Springboard mortgage work?
This mortgage requires two parties:
The Helper(s), who provides the deposit
The Borrower(s), whose name the mortgage is under
The Borrower can apply for either a 100% mortgage or a 95% mortgage, if they can provide a 5% deposit themselves, on a property up to the value of £500,000. Whichever they apply for, The Helper must supply a 10% “deposit”, to be held as a guarantee.
The Helpers 10% contribution is put into a Barclays savings account, where it earns interest, for the 5-year fixed mortgage term. If The Borrower successfully keeps up with repayments, The Helper receives their original deposit back, plus the interest earned, at the end of the initial 5-year term.
What are the mortgage rates like?
With the 100% mortgage, interest rates start from 2.95%, however, these rates drop to start from 2.75% if The Borrower is able to provide the 5% deposit. As with most residential mortgages, the full mortgage term can be anything between 5 to 35 years.
The Helper’s money, in its special savings account, is set to earn interest at 1.5% + Bank of England Base Rate (BBR) for the duration of the 5 years. Currently, this amounts to 2.25%*, which is better than most normal high street savings accounts in our economic climate!
How much can I borrow?
If the sole or combined income of The Borrower(s) amounts to £50,000+, Barclays will lend up to a generous 5.5x the income. For those Borrowers whose income is under £50,000, they will look to lend up to 4x.
Is this a good mortgage product?
As with any mortgage product, whether it’s good or not depends completely on the individual circumstances of The Borrower. What I can say is, that having seen so many people looking to help loved ones get onto the property ladder, and one in four, 20-34 year olds still living at home (The Independent), this provides another great way for them to do so. Reports this year have shown that parents are now one of the top 10 “lenders” when it comes to helping their children onto the property market, using their savings as gifted deposits. What’s different about this product, is that they get their money back, plus a bit extra, and it’s not restricted to existing Barclays customers.
The main downside is that if The Borrow defaults, or worse, the property is repossessed, The Helper may lose part or all their deposit. When the point of this product is that The Helper can expect the money back in 5 years, this could have extremely detrimental consequences for them and The Borrower.
It’s important to note that the account The Helper’s money goes into is essentially a 5-year bond, and therefore cannot be accessed at all until the initial 5-year mortgage term has elapsed. If you, The Helper, have other savings available this might not be such an issue, but it’s worth considering, especially if you’re putting the majority of your savings into this arrangement.
In a market that still makes it difficult for home movers, especially first-time buyers, this is another solution, in a growing pool of specialist products, aimed to help work around the barrier that the need for large deposits poses to many. If you’d like any more information on this mortgage, or advice on your residential mortgage options, please do not hesitate to contact me, Ross MacTaggart on 01732 471 630 or email firstname.lastname@example.org and I will be more than happy to help.
*BBR 0.75% as at 15/11/2019.
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