Are Mortgage Lenders Revisiting Dangerous Territory?
3 minute read
Change is afoot among mortgage lenders this month as some providers made significant updates to their offerings to combat a pre-Brexit, post-stamp-duty-change market slump. Alongside lower interest rates and rising age restrictions, 0% mortgages in certain guises are becoming part of “the fray” as lenders battle for the biggest slice of the UK’s dwindling housing market pie. But what do all of these changes mean for potential buyers and borrowers at both ends of the generational divide? Will the 0% “family springboard” mortgage offered by Barclays encourage more first-time buyers to get their foot on the first rung of the property ladder? Will higher age restrictions see more older people remortgaging homes to help the younger generation get a leg up? We decided to take a closer look…
The Return of the 0% Mortgage
Barclays is the first provider to return to 0% mortgage lending. In early May 2016, the bank launched a 0% “family springboard” mortgage scheme, which enables buyers to purchase a home with no need for a deposit; providing a “helper” (typically the borrower’s parents) pays an amount equal to 10% of the house purchase price into a related savings account. After three years, this amount – plus interest – is returned to the helper, as long as the borrower has kept up with mortgage repayments.
The Rise of the “Bank of Mum & Dad”
This new method of assistance reflects a wider societal trend, which now sees 25% of all mortgages taken on with support from the borrower’s parents. Parental support is predicted to contribute £5bn to mortgages in 2016, with 300,000 parents lending their children deposits.
Age Restrictions on the Up
The lifting of age restrictions on mortgage products could make it even easier for older generations to support young first-time buyers. Halifax lifted its age restriction to 80 in May 2016 and potentially plans to raise the limits on other loan products to 89. With older people now more able to remortgage their own homes to support younger family members, the “bank of mum and dad” and the “bank of granny and granddad” could now be even more generous.
Competition Could Mean Hot Water
These significant changes to lending practices have been brought on by a new competitive spirit amongst mortgage providers, who have seen a slump in business triggered by a market uncertain about the consequences of the forthcoming Brexit vote, and landlords put off by new changes to stamp duty and income tax rules. But while the new products and criteria make mortgages more tempting and more accessible, they could also be making them more dangerous to the economy at large. Do you think mortgage lenders are being irresponsible in their battle to win more business? Would you make use of a 0% mortgage? Have your say below, or for personalised mortgage advice and expert brokering, contact the JMB team today on 0800 114 3575.