Family Mortgage Springboard Via Barclays Woolwich

Barclays is offering a new ‘Family Springboard’ mortgage which will give first-time buyers the chance to snap up a deal equivalent to 95 per cent Loan-to-Value (LTV) at 4.69 per cent.

The mortgage, fixed for three years, does however require parents or other family members to tie down 10 per cent of the purchase price of the property into a connected savings account until the fixed rate period ends, so the true deposit laid down is 15 per cent.

The new offer comes as the Government's £80 billion Funding for Lending scheme continues to fuel a mortgage price battle, which is helping bring new products and lower rates for buyers.

With the Family Springboard mortgage, someone buying a home at £160,000 would need to save £8,000 for a five per cent deposit and the family would need to put £16,000 into a savings account.

The savings account pays base rate plus 1.5 per cent. At the moment, this would mean a rate of two per cent, which is equal to the current best buy instant access rate available.

With savings rates this low, family members may be more tempted to help their children or grandchildren get a foot on the property ladder by stumping up the cash 'guarantee'.

Barclays will give parents their money back with interest when the fixed-rate period comes to an end, provided that the mortgage payments are up-to-date. After the three-year period, the mortgage will become a lifetime tracker at a rate of 3.99 percentage points above base rate. The deal also carries a £499 fee. From the buyer's point of view, the Barclays product is a cheaper way to borrow than more straightforward mortgage deals.

Melton Mowbray Building Society has a 95 per cent LTV offer for first-time buyers, without the need for family members to tie-up money in a savings account for security. But this comes with a higher 5.49 per cent rate and £998 fee.

But if first-time buyers are able to save a 10 per cent deposit – or are given the extra 5 per cent they need by family members - they could grab a cheaper rate with the Yorkshire two year fixed account, detailed in the purple box below.

Typically, first-time buyers need to raise a 20 per cent deposit to get on the property ladder. For an £160,000 home, this would equate to £32,000.

According to the Council of Mortgage Lenders (CML), only a third of first-time buyers in recent years have bought their home unassisted and the average age of those buying a home for the first time has risen to 35.

CML figures also 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.

For further information please  contact Ian Harlock (Financial Adviser) on 07852 576301