However, the reality is not as sensational. A 10% deposit is required to be placed in a designated Barclays account by a ‘helper’, which is held for three years then returned to the contributors with interest.
When first launched in 2013, a 5% deposit from the purchaser was necessary to secure the loan. Research carried out by the bank following the launch found 35% of would-be first-time buyers were forced to turn to their parents for a deposit, of which 20% was ‘gifted’, putting a strain on parents’ finances.
So is this a great deal for first-time buyers, first-time buyers with rich parents, or a bit of a let down after the splash that 100% loan-to-value mortgages had finally returned? Our experts reveal feedback on the level of consumer interest for this latest move to innovate first-time buyer products.
Paul Flavin, managing director, Zing Mortgages, says misleading headlines generated from the Family Springboard changes led to solid levels of customer enquiries, but with none of this business being written through Barclays.
Alex Smith, senior mortgage and insurance adviser, Capricorn Financial Consultancy, explains that coverage of the product’s criteria changes has raised awareness among consumers and will hopefully prompt more lenders to innovate in a similar fashion.
Craig Calder, director of mortgage products at Barclays, says the lender has been encouraged by a significant increase in customer enquiries since the announcement, which can only be described as ‘exponential’.
Paul Flavin is managing director of Zing Mortgages
With the recent campaign run by Barclays, we have seen an increase in enquiries for 100% mortgages. Although you and I know that this is just a rehash of the Woolwich Springboard Mortgage, where the applicants’ parents lock the equivalent of 10% deposit into an account for a set period, to ‘Joe Public’ this is Barclays launching a pure 100% mortgage product.
Disregarding the excitable calls from estate agents received as soon as the news broke, each client call starts with an explanation of the true nature of this product, followed by a brief rundown of alternative products to try to lift the spirits of the previously eager caller.
Thanks to Barclays, we have generated some solid enquiries resulting in business written, although none of which actually ended up with Barclays. The applicants we have dealt with have either chosen not to continue as they have no available funds or, more often than not, have decided to go for a straight forward 95% or 90% mortgage product. In some cases they have used a gift of deposit from parents to cover any shortfall. Parents also seem to be more willing to gift a 5% to 10% deposit to their offspring rather than lodge 10% in a Barclays account.
In all, thanks to the misleading headlines generated from the Barclays’ changes, we produced some good business at a time when we see a slight dip caused by the buy-to-let market pausing for breath.
Alex Smith is senior mortgage and insurance adviser at Capricorn Financial Consultancy
I wouldn’t say changes to the Springboard mortgage have increased the level of enquiries we have received, but more buyers do appear to be aware of the product.
The improvement to the rate of interest, along with the inclusion of a strong income multiple for certain borrowers, should prove very popular with families who would like to help, but are not in a position to ‘gift’ the money as they require it for retirement. It also allows families to help more than one child at once, either at the same time or consecutively. This should prove very popular as resources can be pooled together and held in the short term, attracting a rate of interest better than the average easy access savings account on the high street.
Perhaps the most significant aspect is the way Barclays have shaken-up this relatively under-utilised side of the market by introducing a product that will have wider appeal than previous deals, and should force other lenders who offer something similar to innovate and improve their products.
Craig Calder is director of mortgage products Barclays
We’ve been very pleased with the level of interest the Family Springboard has generated with consumers, the media and other commentators. We’ve certainly seen a significant increase in contacts from consumers calling into our call-centres and branches. The levels visiting our consumer and intermediary websites to enquire about the product can only be described as exponential.
On the whole, the changes have been very well-received. It’s been encouraging to see that where people have looked beyond some of the headlines, they have been able to understand how the mortgage works.
Family Springboard Mortgage has been available for more than three years, so we understand how our customers value this product. Particularly for those first-time buyers who want to own their property and switch their rent payments for mortgage payments, or for next-time buyers moving on to the next rung of the property ladder. The family helpers are happier to put the 10% contribution in an interest-earning account for three years than to offer their own property as security for the mortgage, especially if they anticipate needing to help more than one of their family onto the property ladder.
While it’s a great solution for some customers, we know it’s not for everyone. It’s part of our wider suite of first-time buyer solutions and naturally some customers who initially enquired about Family Springboard are now looking at other products such as Help to Buy or our joint borrower/sole proprietor offering.