Is That New '100 Percent Mortgage' Actually Going to Help Struggling Millennials Buy Their First Home?
Nah, mate. And here's why.
Home sweet home: the picket fence, the TV cabinet, cat litter on linoleum, a slidey conservatory door and a ratty wicker bin. How weird does that once-reasonable dream sound now? These days we hope we might one day be able to afford a one-bedroom bungalow somewhere off an A-Road, maybe in some kind of toxic hazard zone to make it affordable. Yet, increasingly, even that seems unlikely, as the property market is talked about more and more with the resigned tones normally reserved for polio patients. It's starting to look like "in your dreams" is exactly where the possibility of owning a home is going to stay.
That said, on Wednesday, Barclays bank announced a no deposit mortgage, a scheme intended to help first time buyers get a foot on that property ladder thing everyone keeps talking about. The scheme is being made out to be an opportunity for those without the financial resources to make the initial down-payment on a property. But is it really as good as it sounds?
WHAT DO YOU NEED TO QUALIFY FOR THE 'NO DEPOSIT MORTGAGE'?
Seriously, mate, you don't need anything. It's a no deposit mortgage, and that means you don't need a penny. Barclays are literally saying: "Put it away, your money's no good here." We're constantly talking about how hard it is for first time buyers now that terraced houses in Watford cost more than small Pacific islands, so the opportunity to get a mortgage without having to raise the start-up funds is a ray of light in an otherwise dark, over-priced box-room.
SERIOUSLY, I COULD JUST GET ONE OF THESE TODAY?
No so fast. In fact, what you really need are everyone's favourite mythical guardian angels: rich parents. You see, instead of the deposit, you need a guarantor (rich parents) who can put 10 percent of the mortgage into a savings account for you. They can't touch this money for years, so basically it's a lot like a deposit, only it eventually goes back to them rather than paying off your mortgage. Barclays call this savings account the "helpful start" account – two words which, in this context, I can't help but read in a really posh voice that gradually turns into a sinister laugh.
WHAT ELSE DO YOU NEED?
Well, even if you've got rich parents, that doesn't necessarily mean you're sorted. You also need to be earning £50,000 or more in order to borrow loans that are five times your income. Which makes you think: if you need to be earning that much to benefit from the scheme, then who is this for? If even people on £50,000 a year can't afford to save for a deposit, we are all truly fucked.
CAN I GET A FAIRER DEAL ANYWHERE ELSE?
According to MoneyFacts there are currently six lenders in the UK that are offering no deposit mortgages, and they all require a guarantor to secure the mortgage. Anyone who has ever rented (which is now everyone, right?) will know that asking for a guarantor is nothing unusual. Only, when it comes to applying for a mortgage, the stakes are so much higher and your guarantor stops being someone who will pay for a new microwave if you break the door, and instead has to be able to cough-up vast lump sums.
OKAY, ANY OTHER SHIT YOU WANT TO THROW AT ME WHILE I'M DOWN?
Yeah, go on then. It's worth remembering that, since 2014, the measures have become a lot stricter when it comes to evaluating who is eligible for a mortgage. In many ways this is good thing; it stops banks from giving people mortgages they ultimately can't afford to pay off. However, the new rules were based around checking people's outgoings and financial viability outside of whether or not they can afford the mortgage repayments. Once again, this makes mortgages a comfortable option for those who are being supported by family, and harder for those who are less well off but have saved in order to put the deposit down.
WHAT ABOUT THE GOVERNMENT – THEY'LL HELP ME, WON'T THEY? THE GOVERNMENT? THEY'VE GOT MY BACK THROUGH ALL OF THIS, RIGHT?
Well, George Osborne's Help to Buy scheme has been knocking about since 2013, with the government offering a loan of 20 percent of the property cost, provided the buyer can cough up 5 percent as a deposit. George recently launched a special London edition of the Help to Buy scheme, where the government offered 40 percent of the property, in response to London's far-greater house prices. However, economist Ed Stansfield recently pointed out that in order to qualify for a property in London – given current average asking prices – you'd need to be earning in excess of £64,000. Once again, it's a leg up for those already halfway there.
WILL I EVER OWN A HOUSE?
Probably not, no. These mortgage schemes are basically a way for the government and big financial institutions to say: give up, anyone without inherited wealth; we're not even going to try to help you any more.
That said, Barclays' no deposit mortgage isn't necessarily a bad thing. For some people it's obviously helpful. Parents' 10 percent deposit will be paid back by the bank with interest – something that's unlikely if they'd lent the money directly to their kids – and obviously it's a much easier way for them to buy than requiring the full lump sum on a normal mortgage.
Rather, the no deposit scheme – and the thin wedge of people it applies to – instead indicates a sorry state of affairs. A helping hand for people who shouldn't need it in the first place.
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