A springboard to mass affluent acquisition for Barclays?
UK parents are now a Top 10 Lender. In 2016 the Bank of Mum and Dad will help finance 25% of mortgage transactions in UK, according to research by L&G. Britain’s parents, families and friends will between them give their kids £5bn this year to help them on the property ladder.
The terms of this financing are unmatched, very favourable and flexible; usually it’s a gift.
Hot on the heels of this research we hear of the launch of a new Barclays mortgage, the Family Springboard. It’s clearly built to specifically target this behaviour.
The Family Springboard is an interesting twist on the 100% mortgages of old – no one would go there again right now. It is really a 90% to 95% loan-to-value mortgage, fixed for three years, where a 10% deposit from a ‘helper’ is held for the term in a separate interest-bearing account.
Barclays mortgage benefits both generations. For the younger generation it’s a foothold or step up on the property ladder, essentially on the same terms as before. For parents it’s an interest-earning, limited risk way of helping their children. Or rather, it’s an investment instead of an expense.
All good so far. So what about Barclays? It’s an interesting play, at a very competitive rate. What’s in it for them?
A bigger slice of the first time mortgage market? And of the first re-mortgage market? And get more funds on deposit? Yes, Yes and Yes.
But think of the buyer for a moment. They’re in work, able to meet affordability criteria, but just can’t save for a whole deposit. They have relatively affluent parents with both realisable and most likely significant and growing fixed assets. They want to buy a house; a stable and accumulative asset.
They are a great bet for the future. The long term future.
In the Family Springboard has Barclays actually hit upon a product to on-board the new generation of mass affluent customers? If they’re thoughtful about how they manage these customers’ experience, it could be the start of a long and deep relationship.