Could new mortgage help FTBs?
Designed to help first-time buyers, Barclays Mortgages have recently launched the Barclays Homebuyer Cashback Mortgage.
Also available to home movers, the new mortgage is designed to help towards recovering the cost of any stamp duty incurred on a new property purchase.
Stamp duty is owed on residential properties with a value of £125,000 or more.
For a five-year fixed rate, the 80% LTV is available from 2.69%; for loans up to £500,000, there is no fee.
The full cost of stamp duty will be covered for properties valued at £250,000 or less.
For properties with a value over £250,000, a contribution of £2,500 will be made towards stamp duty costs on properties up to £500,000.
Mortgages between £100,000 – £150,000 will also have cashback of £1,250 available. This equates to the maximum owed stamp duty on properties with a value of £187,000.
Although the scheme is aimed at those trying to get onto the housing ladder, it is arguable as to how effective it will be in all cases.
In order to be eligible for the scheme, a 20% deposit is required, a potential problem which was been highlighted by Rachel Springall. The finance expert at Moneyfacts.co.uk stated that this percentage “might not be feasible for some”.
Statistics indicate that there may indeed be a disparity between the annual income of the average first-time buyer and the cost of a house deposit.
The Halifax First Time Buyer Review revealed that the average age of someone purchasing their first home was between 27 (Carlisle and south Wales) and 34 (Berkshire and London).
According to the Office for National Statistics, the latest earnings figures revealed that for 22-29-year-olds, the average annual salary was £23,192. For those aged between 30 – 39, the average salary was £29,770.
The Land Registry HPI data recently indicated that during December 2016, the average value of a UK property was £219,544. 20% of this is £43,908.
Although houses under £250,000 will have the full cost of stamp duty covered over the course of the mortgage, being able to attain a 20% deposit in the first place is likely to be beyond the means of many. Comparing salaries to the required deposit indicates that for the average first-time buyer, it is likely to represent a large portion of their earnings.
The average house price in London was recorded as £483,803 in December according to the HPI figures. Despite earnings in London being relatively higher, a 20% deposit would still be the significant sum of £96,760.
Even if the buyers are able to fund a 20% deposit, it is questionable how effective the mortgage will be in relation to covering stamp duty on higher value properties.
For a residential property valued at the price of £483,803, the stamp duty owed would total £14,190. Higher value properties will have a higher stamp duty land tax and arguably, it is the buyers of these properties who will require greater financial assistance.
Although cashback of £2,500 is available for purchasers buying homes between £150,000 and £500,000, this sum does not cover even one-quarter of the stamp duty owed on the average London property in December.