Barclays is giving first-time buyers a leg up onto the property ladder with the launch of a new mortgage which covers the cost of stamp duty.
The Barclays Homebuyer Cashback mortgage is available to borrowers with a 20% deposit and has a 2.69% interest rate over a five-year fixed term.
Buyers taking out a loan between £100,000 to £150,000 will receive £1,250 cashback, while those borrowing £150,001 to £500,000 will receive £2,500.
Stamp Duty Land Tax is a progressive tax that you start paying on properties worth more than £125,000. As the price of the property increases, so does the rate of stamp duty.
In December 2014, the government scrapped the old slab structure and introduced a new banding system to help benefit anyone purchasing a home priced under £937,500. Those buying a home above this amount now face a bigger tax bill.
You now pay 0% up to £125,000; 2% to £250,000; 5% to £925,000; 10% to £1.5million and 12% above that.
Is it any good?
The deal will come as welcome news to first-time buyers who are are finding it increasingly difficult to get a foot on the property ladder as a result of soaring deposits, house prices and the high cost of stamp duty.
Rachel Springall, finance expert at Moneyfacts, said: “This new incentive from Barclays is likely to entice first-time buyers concerned about the impending cost of stamp duty once they find their ideal home. We have seen similar stamp duty cashback in the past from Halifax and TSB, and whilst the cashback from Barclays will be seen as a huge helping hand, buyers must make sure that the overall deal is the most cost effective choice for them.
“Buyers will need to stump up a 20% deposit to be eligible for the stamp duty cashback, which might not be feasible for some, particularly as they will still need to cover the cost of a valuation fee, legal fees and moving costs. There are alternative deals out there offering less or no cashback, but the rates are usually lower and may prove more cost-effective over the life of the deal depending on the amount borrowed and deposit available, so it’s important to buyers to compare carefully.”
Aaron Strutt, product director at Trinity Financial, said: “Even though more of the lenders are offering cashback incentives, it is unusual for one of them to provide enough money to pay for the stamp duty on a £250,000 purchase.
“If you do not need the cashback to put towards the deposit or stamp duty, then it is probably worth opting for cheaper deal as the rate is slightly higher. The lenders are coming up with new incentives to make it easier to get on the property ladder and tempt more borrowers into action.
“There are 12 lenders offering sub-2% five-year fixes, although you will need a larger deposit to access them. Five-year deals are very popular at the moment because the rates are so cheap and borrowers like the thought of longer term payment security. Another bank offered a similar cashback scheme last year and it was incredibly popular. This sort of product allows younger borrowers to be less reliant on the Bank of Mum and Dad.”
