Getting your foot on the property ladder
In an article published yesterday by The Telegraph, young people are now finding it easier to get on the property ladder with over half of homes in Britain considered ‘affordable’. The definition of this is a property costing less than 4.5 times the income of an average first time buyer. According to Post Office Money, almost nine in ten areas (88%) of Ipswich have homes for sale which fall into this category.
Chris Jessup, Partner at Fenn Wright said “Ipswich is increasingly popular with first time buyers and regularly features as a property hotspot. With excellent transport links and regeneration going on throughout the town and waterside, Ipswich is ideal for commuters and those with young families, with many highly rated schools in the area.”
In recent years we have all become familiar with the term ‘Bank of Mum and Dad’ as increasing numbers of first-time buyers rely on parental support to get that initial foothold on the property ladder. Research by Legal & General has found that almost a quarter of first-time buyers planned to use family finances to help fund their deposit, and that parents are either downsizing, re-mortgaging or using equity release schemes in order to be able to help them.
In a move designed to give more people the opportunity to own their own home, we take a look at what one lender has to offer.
Barclays is introducing a mortgage option which removes the requirement for a 5% deposit from the borrower. Under the previous terms of their Family Springboard Mortgage, the prospective homeowner would typically put down a deposit of 5% and then be offered a mortgage of up to 4.4 times their annual salary for a fixed rate three-year period and a 25-year term.
In addition to the buyer’s deposit, the family member would also put 10% of the borrowed amount into a Barclays’ Helpful Start account. Paying 1.5% over The Bank of England Base Rate interest (currently 0.75%), funds can be withdrawn from this account after a three-year period, along with any interest accrued, as long as mortgage payments have been successfully kept up.
Although this 5% option will remain available to prospective borrowers, those who take out the new deposit-free mortgage product will have the opportunity to borrow up to 5.5 times their income (as long as this exceeds £50,000) and up to a maximum of £500,000. This new limit also keeps the mortgage within the SDLT threshold, which means for properties costing up to £500,000, no Stamp Duty is paid on the first £300,000.
Barclays has also extended the fixed-rate period on these no-deposit mortgages from three to five years and increased the term from 25 to 35 years. There are many lenders offering similar products and you should seek advice from a mortgage advisor to find the best deal for you.