Barclays Zero Deposit Mortgages
- LONDON (AP) — Barclays Bank is eliminating the deposit requirement for its "Right to Buy" mortgage programme in England, the bank announced Tuesday.
- Previously, Barclays required a 5% deposit. Now, the bank will utilize the RTB discount as the deposit.
- For example, a borrower receiving a 40% discount through the RTB scheme will be treated as having a 40% deposit, granting them access to LTV rates of 60%,...
Barclays Scraps Deposit Requirement for right to Buy Mortgages
Table of Contents
- Barclays Scraps Deposit Requirement for right to Buy Mortgages
- Barclays Scraps Deposit Requirement for Right to Buy Mortgages: your Questions Answered
- What is the Barclays “Right to Buy” Mortgage Program?
- What are the key changes to Barclays’ Right to Buy mortgages?
- How does using the RTB discount as a deposit work?
- What interest rates will I be eligible for with this new approach?
- Are there any loan limitations with this new Barclays mortgage?
- Are there any exceptions to the no-deposit rule?
- Can you provide a summary of the key differences?
- Why is Barclays making these changes to its Right to Buy mortgages?
- What other initiatives is Barclays undertaking to improve homeownership access?
- What does the Financial Conduct authority (FCA) have to do with this?
- How did the market react to this proclamation?
LONDON (AP) — Barclays Bank is eliminating the deposit requirement for its “Right to Buy” mortgage programme in England, the bank announced Tuesday. The “Right to Buy,” or RTB, scheme allows qualifying tenants to purchase their council homes at a discounted rate.
New approach to RTB Mortgages
Previously, Barclays required a 5% deposit. Now, the bank will utilize the RTB discount as the deposit. This allows borrowers to access lower interest rates typically reserved for mortgages with lower loan-to-value (LTV) ratios.
For example, a borrower receiving a 40% discount through the RTB scheme will be treated as having a 40% deposit, granting them access to LTV rates of 60%, according to Barclays.
Loan Limitations
Barclays said loans are capped at 90% of the property’s full market value to ensure responsible lending. This means the bank can lend up to 100% of the discounted purchase price, provided that amount does not exceed 90% of an independent valuation.
Exceptions for High-Value Properties
The deposit requirement remains in place for loans on high-value properties.These are defined as houses valued above £640,000 or apartments above £310,000. In these instances, Barclays may lend up to 85% of the discounted price, as long as it does not exceed 80% of the open market valuation.
Executive Commentary
Lee Chiswell,head of barclays’ mortgages,stated that removing the deposit hurdle will help more people achieve homeownership. “The Right to Buy program has long provided a crucial pathway to homeownership for council tenants,” Chiswell said. “By lending for the entire value of the property, we eliminate the need for buyers to have a deposit, helping many to overcome the largest barrier to owning a home.”
Broader Accessibility Initiatives
Barclays is making its standard mortgage range available to RTB customers,rather than offering specific RTB mortgage products. This move is part of a broader effort by Barclays to make homeownership more accessible, including initiatives like the “mortgage boost,” which allows family members or friends to increase the amount a borrower can access without directly lending funds.
Regulatory scrutiny
The Financial Conduct Authority (FCA) is reviewing its mortgage lending expectations as part of proposals to simplify its rules. This could potentially ease access to mortgages for a wider range of individuals.
Market Reaction
barclays shares rose 1.9% to 246.49 pence in Tuesday morning trading in London.
Barclays Scraps Deposit Requirement for Right to Buy Mortgages: your Questions Answered
What is the Barclays “Right to Buy” Mortgage Program?
The Barclays “Right to Buy” mortgage program is designed for individuals who qualify to purchase their council homes in England at a discounted rate. This scheme, also known as RTB, helps tenants become homeowners.
What are the key changes to Barclays’ Right to Buy mortgages?
The most significant change is the removal of the deposit requirement for eligible borrowers. Barclays announced that they’re eliminating the need for a 5% deposit, offering a more accessible path to homeownership. They will now utilize the RTB discount as the deposit.
How does using the RTB discount as a deposit work?
Instead of requiring a cash deposit, Barclays will treat the discount received through the RTB scheme as the borrower’s deposit. Such as, if a borrower gets a 40% discount on the property, Barclays will consider that as a 40% deposit. This can allow them to access lower interest rates typically reserved for people with larger deposits.
What interest rates will I be eligible for with this new approach?
The core source text states, according to Barclays, that a borrower with a 40% discount through the RTB scheme is treated as having a 40% deposit, granting them access to the rates associated with a 60% loan-to-value (LTV) ratio. This means you might potentially be able to access lower interest rates than before as you are seen as having a larger deposit.
Are there any loan limitations with this new Barclays mortgage?
Yes, Barclays caps loans at 90% of the property’s full market value to promote responsible lending. It also means the bank can lend up to 100% of the discounted purchase price,provided that amount doesn’t go beyond 90% of an independent valuation.
Are there any exceptions to the no-deposit rule?
Yes, the deposit requirement remains in place for high-value properties. These are defined as:
Houses: Valued above £640,000
Apartments: Valued above £310,000
In these exceptional cases, Barclays may lend up to 85% of the discounted price, as long as it doesn’t exceed 80% of the open market valuation.
Can you provide a summary of the key differences?
Certainly. Here’s a quick overview:
| Feature | Standard Right to Buy (Pre-Change) | New Approach (Post-Change) |
|---|---|---|
| Deposit Requirement | 5% of property Value | Removed (Discount used as Deposit) |
| Loan limits (General) | Up to 90% of market value | Up to 90% of market value on full price, but no more than 100% of discounted price if the final rate stays within 90% market value. |
| Loan limits (High-Value Properties) | Applies (up to 85% of the discounted price) | Applies, according to the details in the previous row. |
Why is Barclays making these changes to its Right to Buy mortgages?
According to Lee Chiswell, head of Barclays’ mortgages, removing the deposit requirement aims to help more people achieve homeownership. The bank recognizes the Right to Buy program as a crucial pathway and is actively trying to eliminate the biggest barrier to owning a home.
What other initiatives is Barclays undertaking to improve homeownership access?
Barclays is making its standard mortgage range available to RTB customers, thereby removing the need for specific RTB mortgage products. Along with the mortgage boost, this initiative intends to aid homeownership, allowing people to gain access to money.
The FCA is reviewing its mortgage lending rules, which could lead to simpler rules and potentially ease access to mortgages for more people. This scrutiny may contribute to additional industry evolution in the future.
How did the market react to this proclamation?
Barclays’ shares rose 1.9% to 246.49 pence in Tuesday morning trading in London, which indicates a favorable response from the market to this news.