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Back to pre-crisis days? Barclays offers 100% mortgages for homebuyers
U.K. banking giant Barclays is to offer 100 percent mortgages, in a move that echoes the risky lending practices that led to the global financial crisis of 2008.
Announcing the deal on Wednesday, Barclays said deposits would no longer be needed for its Family Springboard mortgage, if borrowers had a "helper contribution" worth 10 percent of the property purchasing price from a relative or guardian.
"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," Raheel Ahmed, head of Barclays Mortgages, said in a media release.
The mortgage will come with a three-year fixed interest rate of 2.99 percent if buyers make no deposit.
The "helper contribution" is placed in a savings account and returned to the family member with interest three years later, rather than gifted, according to Barclays.
"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," Ahmed said.
Prior to Wednesday, first-time buyers needed a five percent deposit for a Family Springboard mortgage with Barclays.
Homebuyers with an income of more than £50,000 ($72,409) will be able to claim a mortgage of up to 5.5 times their annual income, up from the previous maximum of 4.4 times.
The so-called Bank of Mum and Dad will lend more than £5 billion in 2016, providing deposits for over 300,000 mortgages, according to a report out on Tuesday from the U.K.'s Centre for Economic and Business Research and Legal & General.
The report found parents would be involved with 25 percent of all U.K. property purchase this year, making an average contribution of £17,500 for each purchase.
The high price of buying a home is politically contentious in the U.K., particularly in the ultra-expensive London market. The lack of affordable London homes is a campaigning topic among contenders to be the city's next mayor, the election for which is taking place on Thursday.
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