Barclays launches first no deposit mortgage since crisis

Such products were slammed in the wake of the 2008 financial crisis for being a major catalyst of the meltdown.

Unveiling the new scheme, Barclays said it has announced ‘enhancements’ to its ‘Family Springboard Mortgage’ to celebrate the third anniversary since its launch in 2013.

The lender said the move “has opened up the door to even more first time buyers and home movers by removing the need for them to put down a deposit when purchasing a home”.

But some housing analysts have said the new product is “crackers”, and that not requiring a deposit will help people buy property they can’t afford.

Barclays said the new scheme means those looking to buy a home for the first time no longer need to provide a deposit themselves, only the 10 per cent contribution from a relative or guardian that can subsequently be paid back - effectively replacing the deposit requirement from the borrower.

Previously a 5 per cent deposit would have been required from the first time buyer, to secure a Family Springboard mortgage.

Under the new scheme, when the buyer takes out the mortgage, the family helper opens a Barclays account linked to the mortgage in which they deposit savings equal to 10 per cent of the final price of the house. After three years, the money in the account is returned to the family helper with interest.

Barclays Mortgages said recent first time buyer research it has carried out highlighted the significant burden high deposits placed on first time buyers and their parents. It found that 35 per cent of prospective first time buyers are forced into asking their parents for help when securing a mortgage. Of these, 20 per cent who accept help, see the money as a ‘gift’ that doesn’t need to be paid back, therefore placing a significant levy on the bank of Mum and Dad.

To further support first time buyers, Barclays also said income multiples will also be raised for Family Springboard Mortgage customers with an income of more than £50,000, moving up from a maximum of 4.4 times their annual income to 5.5x.

Raheel Ahmed, head of Barclays Mortgages said: “With over a third of young people still turning to their family for help with buying a home, we have increased the accessibility of the Barclays Family Springboard Mortgage. We want to offer more people a way to get on the property ladder and to walk through the door of their first home earlier than they perhaps thought.

“Buying a first home is a hugely important step in everyone’s life and one that has unfortunately become tougher for many in recent years. When Barclays originally launched the Family Springboard mortgage in 2013 we made the decision to help both homebuyers and the family who wanted to support their children, but couldn’t just give away large sums of money.”

However, Henry Pryor, a buying agent and housing market commentator, described the mortgage as a “financial grenade”.

“The premise is crackers. If this achieves the marketing hit that Barclays are after it’s a risky strategy because there are enough of us who remember who got us into the septic tank of financial crisis in 2008,” Pryor said.

Alice Martin, a researcher at the New Economics Foundation, said the scheme showed banks are trying to “paper over the affordability crisis” by making it easier to recycle money earned off the property of the parent, through another property for their children.

She added: “It makes the gap between housing haves and have-nots wider, giving a leg up for a handful of people with parents able to help them in this way.”