Barclays has unveiled its Mortgage Boost scheme – which could help first-time buyers struggling to get onto the property ladder – but there are some pros and cons to it
Getting on the property ladder has just got easier as Barclays shakes up its mortgage offerings. The banking giant states the average age of the first-time buyer in the UK “rose to almost 34 last year”, as swathes of Brits struggle to scrimp and scrape for a deposit amid the cost of living crisis.
It has therefore launched a ‘Mortgage Boost’ scheme, allowing family or friends to increase the amount that can be borrowed towards a home, without having to actually lend or gift money directly or put down a larger deposit. It works kind of like a guarantor, and means those ‘boosting’ a person’s mortgage will be jointly liable.
Barclay’s Mortgage Boost – how does it work?
The amount you can borrow for a mortgage depends largely on your income, amongst other actors such as any financial commitments you may have have (credit card debts etc). As a general rule of thumb, lenders will allow you to borrow up to 4.5 times your salary, and will expect around a 10 per cent deposit – but this is not always the case.
In a recent press statement, Barclays used the example of someone who has an income of £37,500 a year and a deposit of £30,000 – stating that they would be eligible to purchase a home worth up to £198,375 (£168,375 + £30,000). However, with the bank’s new ‘Mortgage Boost’ – the amount you can borrow could increase significantly. “Say a parent joins, and they also have an income of £37,500,” Barclays said. “Then you could be able to borrow a total of £270,000, allowing you to purchase a home worth up to £300,000.”
Sian McIntyre, managing director of Life Moments at Barclays, welcomed the news, acknowledging that buying a home has become 2tougher for many in recent years’. She added: “We know people feel like they have to make huge compromises in order to save for a large deposit, and that family may want to help but cannot afford to. Mortgage Boost can help answer these challenges, supporting people to buy their first home earlier and without giving up on their other dreams.”
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Funmi Olufunwa, founder of Hoops Finance, is a qualified consumer finance lawyer and mortgage advisor with more than 20 years of financial services experience. Speaking to the Mirror, she explained how challenging the housing market is for many first-time buyers, stating that Barclays Mortgage Boost could ‘mean the difference between being able to buy a home now, having to wait much longer to buy a home or not buy one at all.’
She added: “So, it’s worth considering, especially for anyone with family or friends that can’t give financial support e.g. a lump sum cash deposit but can support by ‘lending their income’. As with any mortgage, there are pros and cons. With these types of mortgages, the plan is often for the family and friends to be removed when the property is remortgaged e.g. when a few years have passed and the income of the person who owns the property has risen and they can pass the affordability assessment on their own. But, there’s no guarantee when or if this will happen which means that they may have to remain on the mortgage for longer than planned, potentially impacting their own future life and financial choices.”
Funmi pointed out that the ‘boost’ scheme is only really available or those with family or friends who aren’t only willing to help – but can also pass affordability checks. “Rightly so,” she added. “Anyone without this type of support won’t be able to benefit, much like those without the bank of mum and dad (and gran and grandad).”
The ace continued: “A deposit of some level will still be required which will need to be saved for alongside other home-buying costs and there’s always going to be an argument that this type of product artificially boosts affordability which then pushes up house prices because of the new demand. In an environment where people want to buy homes but are struggling financially, options like this are helpful to make that home-buying dream a reality. I’d always suggest speaking to an independent mortgage advisor who can consider your circumstances and go through all of your mortgage options.”
Mortgage Boost – the small print
Mortgage Boost allows family or friends to join a mortgage application as a named party, but this doesn’t mean they own the property – or that they’ll be named on the title deeds. Their income will be used to increase the amount that can be borrowed under the mortgage, and they will be jointly and severally liable from the outset, along with the buyer.
If you’re a ‘Booster’ for a friend or family member’s mortgage, you will have to undergo full credit checks, and the mortgage will show on your credit report. It is recommend to obtain independent legal advice to make sure you’re fully aware of the impact this mortgage could have on your own finances and ability to borrow.
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