Barclays Offer Sees Return Of 100% Mortgages

Barclays (LSE: BARC.L - news) has launched a 100% mortgage – the first time such a product has been made widely available since the financial crisis.

But the home loan deal requires a "helper", usually the buyer's parents, to put down cash to the value of 10% of the house price as a guarantee in a savings account linked to the mortgage.

The need for this deposit could allay concerns about the move signalling the revival of the riskiest home loans – offering up to 125% of the value of properties – that were available prior to the 2007 credit crunch.

Barclays also emphasised that it would carry out a full affordability check on borrowers.

The launch of the product also shows the increasing importance of the so-called "bank of mum and dad" – parents giving their children a helping hand onto the housing ladder.

Under the Barclays deal, the 10% guarantee would be returned to the "helper" with interest after three years, provided the borrower has kept up with repayments.

It (Other OTC: ITGL - news) means that parents who put money down to help their children buy a home can expect to see their cash back rather than remaining tied up in the value of the property.

Barclays' "family springboard" product had already allowed people to climb onto the housing ladder with a 5% deposit and a 10% guarantee from a "helper".

The new deal means that now only the latter is needed.

The mortgage rate for those with a 100% mortgage will be slightly higher than for those borrowing 95%.

For a three-year fixed deal, a borrower with no deposit can get a 2.99% rate, compared to 2.79% for a borrower with a 5% deposit.

The new Barclays deal also increases the maximum that home buyers could borrow as a multiple of their income.

Customers with an income of more than £50,000 will be able to take out a mortgage worth up to 5.5 times their income, up from 4.4.

Rachel Springall from independent comparison site Moneyfacts.co.uk said risky lending was now less likely because of new rules on checking borrowers' affordability that had been put in place since the financial crisis.

The Bank of England also has powers to rein in risky lending practices if it becomes concerned about the housing market overheating.