A major high street bank has launched a new £0 deposit mortgage for Right to Buy home loans.
Barclays has scrapped its deposit requirement for people buying their council or housing association homes under the government’s Right to Buy (RTB) scheme.
Until now, the bank required at least a 5% deposit for RTB mortgages. But under the new changes, eligible buyers no longer need to put down any money up front.
Right to Buy (RTB) is a government scheme that allows those living in council houses or some housing association properties to buy their homes at a heavily discounted rate, based on how long they’ve lived there.
For example, someone who’s been a public sector tenant for three to five years can get a 35% discount, and the discount gets bigger the longer you’ve lived there.
How does the Barclays new zero deposit mortgage work?
Barclays will now use the RTB discount in place of a direct deposit. This enables eligible borrowers to access lower loan-to-value (LTV) mortgage rates, which typically come with better deals and lower interest rates. This could make repayments cheaper and reduce the overall cost of borrowing.
For example, a tenant purchasing their home with a 40% RTB discount would be treated as having made a 40% deposit, therefore qualifying them for 60% LTV rates, meaning the mortgage is based on 60% of the home’s value.
Barclays will lend up to 100% of the discounted purchase price – meaning buyers don’t have to pay anything upfront – as long as the total loan amount doesn’t go over 90% of the property’s full market value.
For example, if a home is worth £200,000 and the buyer gets a £80,000 RTB discount (making the discounted price £120,000), Barclays can lend the full £120,000 because it’s less than 90% of the property’s full market value (£180,000).
Deposits are still required for loan amounts on ‘high-value properties’ – above £640,000 for houses, and £310,000 for flats.
In this case, Barclays can lend up to 85% of the discounted price as long as this does not exceed 80% of the open market valuation.
Who is eligible for a Barclays zero deposit mortgage?
The mortgage is available for those who can buy their homes under the Right to Buy scheme.
According to statistics from London Councils, around 300,000 council homes have been sold off through Right To Buy since the policy was first introduced in 1980 under Conservative Prime Minister Margaret Thatcher.
In 2023, meanwhile, London boroughs had 301,000 households on their waiting lists.
According to the UK Government website, you can apply to buy your council home if:
- You’ve had a public sector landlord (a council, housing association or NHS trust) for 3 years (not necessarily three years in a row).
- It’s your only or main home
- It’s self-contained
- You’re a secure tenant. As a secure tenant, you’re able to live in the property for the rest of your life, as long as you keep to the conditions of the tenancy.
Lee Chiswell, head of mortgages at Barclays, said: ‘The Right to Buy scheme has long been a crucial route to homeownership for council and housing association tenants, yet we know that saving for a deposit remains a key obstacle.
‘By lending for the full value of the property, we’re removing the need for buyers to have any deposit at all, helping many completely sidestep their largest barrier to home ownership.’
The controversy of Right to Buy
From contributing towards plummeting levels of social housing stock across the country to abuse of the system, Right To Buy is a scheme that’s had its fair share of backlash.
Metro’s property writer, Eleanor Noyce, recently spoke to Louise Drew, head of building communities at Shakespeare Martineau who explained that it isn’t the ‘perfect route to home ownership’ it might appear to be on paper.
‘There are numerous pressures facing the housing market in the UK, not just Right to Buy, although it hasn’t made things better. It has certainly contributed to plummeting levels of social housing stock across the country,’ Louise says.
‘A recent report by Marrons has shown that Greater London’s social housing stock is due to drop by a further 95,000 homes by 2040, a huge number of which will have been sold off under Right to Buy. Add in rapidly growing council housing waiting lists and you have a perfect housing storm.’
She adds: ‘Sadly, the system is open to quite widespread abuse. There are numerous instances where vulnerable people have been approached and offered money to allow them to purchase their home, only to be forced to pass it over to predatory third parties, after the five-year period has elapsed.
‘There are also cases where children have convinced parents to buy their council houses and then pass them over to them to avoid inheritance tax, after which the parents have found themselves exposed to the risk of homelessness.’
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