You can now buy a house with no deposit. Wait, what? How can you get a mortgage if you don’t have any money to use as a down payment? Surely a deposit is what we’re all supposed to be working towards?
The difficulty of getting a deposit together is often blamed for the difficulties many young people face when trying to break the cycle of renting and get a tentative foot on the housing ladder. And now, as a result of this stopper in the housing market, Barclays are now offering a 100% mortgage to first time buyers. This is the first no deposit mortgage which has been offered since the big financial crash of the mid-2000s and is basically intended to help you buy the property that you can’t afford.
Critics aren’t so sure this is a good idea. Housing expert Henry Pryor has called it a ‘financial grenade’ which is tantamount to risky lending which, as many people have not yet forgotten, is what caused the financial crisis and subsequent ‘Great Recession’ in the first place. Northern Rock, anyone? (In case you can’t remember Northern Rock was a bank, the one with a pink logo, which offered people 100% mortgages, they folded in 2012 as the recession really sank its teeth in to the economy).
How the 100% mortgage will work is that while the mortgage is this: a family member or 'helper' has to open a Barclays account linked to their borrowing in which they have to put savings which equal 10% of the price of the property being purchased. After 3 years have passed that money is returned to the family member, essentially you can do this if you’ve got a relative who can guarantee you to the tune of 10%. You also need to be earning £50,000 or more in order to qualify for this, which really does say something about the state of our housing market: even people earning upwards of £50,000 can’t put up deposits.
With yesterday’s news that the ‘Bank of Mum and Dad’ are now providing deposits for 25% of mortgages in this country this just proves that the divide between those first time buyers whose parents can help them and those whose can’t is ever growing wider and wider. Those who receive a financial leg up from their families are able to pass go and collect £200 while those whose parents can’t afford to help them remain caught on the hamster wheel that is the private rental sector or, even, living with those parents at home in their 20s and 30s.
This morning The Debrief’s petition to #MakeRentingFairreached over a quarter of a million signatures. With this confirmation that the ‘Bank of Mum and Dad’ is fast becoming the only sure fire way to get on the housing ladder, couple with the rising number of people who are forced into renting it’s no surprise that momentum is growing around the desire for a better, fairer and more transparent rental sector for those who have no choice but to use it.
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This article originally appeared on The Debrief.