BarclaysHopes for struggling mortgage borrowers with smaller deposits have been boosted as two major lenders announced new deals.

From Monday, Barclays will offer a mortgage allowing parents to help their children get on the property ladder with a deposit of just 5%.


Meanwhile, Yorkshire Building Society, the UK's second largest mutual, announced rate cuts across its mortgage range of up to 0.35%, taking it to the top of "best buy" tables.

Under the terms of the Barclays "family springboard" mortgage, parents stump up 10% of the purchase price of the property, which is not handed over to their child but kept in a separate savings account linked to the mortgage. Their child then qualifies for a three-year fixed-rate deal at 4.69% with a 5% deposit.

The deal means that, for example, someone buying a home at £160,000 would need to save £8,000 for a 5% deposit and require a mortgage of £152,000 and their family would need to put £16,000 into a savings account. Based on a 25-year repayment mortgage, the mortgage payments would be £861.34 a month.

Currently, first-time buyers typically need to raise a 20% deposit to get on the property ladder. Barclays will give parents their money back with interest when the deal comes to an end, provided mortgage payments are up to date. Interest is paid at the bank rate plus 1.5%, which would currently amount to interest of 2%. The deal also carries a £499 fee.

Rachel Springall, spokeswoman for financial information website Moneyfacts, said: "The majority of low rates on the market today are aimed at customers who can raise a high deposit, such as 40%, so first-time buyer packages will be much welcomed."

She said the poor returns currently being offered to savers across the market mean that some families may decide to use their extra cash to help their children on to the property ladder, provided they can afford to lock the money away for three years.

Yorkshire's new range includes a deal for borrowers with a 10% deposit fixed at 3.79% for two years. A spokeswoman for the society said that while it has signed up to the Funding for Lending scheme, it has yet to draw down funds. She said the rate cuts came about due to a desire to offer very competitive deals.

Ms Springall added: "Yorkshire's 3.79% two-year fixed-rate is now the market-leading rate for a 10% deposit, however, you do need to raise a £995 fee. They are also a trusted brand so borrowers may look favourably towards getting a deal with them."