Barclays launches new family-friendly mortgage scheme

Tuesday 19th June 2012

Barclays has created a new mortgage scheme by which parents can help their children get on, or move up, the housing ladder by pooling their resources.

Both sets of income are used to calculate the mortgage amount in the Helpful Start scheme, which includes a Family Affordability Plan, and parents do not appear on the property deeds.

Barclays acted after its research showed that the cost of home ownership over a lifetime is £194,000 less than renting.

It found that buying, paying a mortgage and maintaining a home costs £429,000 over 50 years compared to £623,000 in rent.
 Barclays underlined that its figures do not account for the value of the home the buyer will own at the end of it.

Its study found that initially, being a tenant is often cheaper than being an owner, as mortgage repayments tend to be higher than rental costs, but that rents inflate over time.

While the home buyer also has one-off financial hurdles of deposit, Stamp Duty and solicitor’s fees, and permanent liabilities such as maintenance and insurance at the end of 25 years, the buyer will also own his home outright. This increases the advantage of owning over renting to £595,000.

Andy Gray, head of mortgages at Barclays, said: “The cost of stepping on or moving up the housing ladder can be a big barrier for many, but the long-term benefits hugely exceed the initial expense.”

He added: “Many parents have already realised the return from buying their homes and want to give their children this important step towards independence, but they cannot afford to provide them with the deposit to buy their first home or trade up.

“Barclays’ Family Affordability Plan allows parent and child to pool resources and secure a larger loan, thereby helping generate much greater wealth and security for the child stepping on or up the property ladder.”

The calculations in Barclays’ new study show that over a 50-year span, roughly 50% of the cost of home ownership comes in the form of mortgage payments – £210,000 out of the £429,000. Two-fifths of that £210,000 is interest cost, while the rest is capital repayment.

The next largest outlay is maintenance at £170,000. The initial purchase deposit is the next biggest cost, while insurance, Stamp Duty and other costs associated with buying the house in the first place make up the rest.

Figures vary enormously from region to region, due to the differences in rents and house prices across the country, says the study.

For example, in London, buying a typical home would save the owner £396,000 compared to renting it over 50 years, because house prices in the capital are high. In the South-West, by contrast, the advantage is very small (just £34,000) because rents are unusually cheap relative to house prices.

The North-West has relatively low house prices (the second lowest in the country), but rather high rents, and so the advantage of owning over renting there is the second highest in the country at £300,000.