In a significant shake-up of its mortgage lending policies, Barclays has announced that customers applying under the Right to Buy (RTB) scheme will no longer be required to put down a deposit when purchasing their council home.
The Right to Buy initiative enables eligible tenants to purchase their local authority or housing association property at a discounted rate. Traditionally, Barclays – like many other lenders – required a 5% deposit on RTB mortgages. However, the bank has now confirmed it will remove that requirement for borrowers in England, instead using the RTB discount as a substitute for a traditional cash deposit.
Under the new approach, the size of the discount granted through the RTB scheme will be treated as the buyer’s deposit. For instance, a buyer receiving a 40% discount on their home will be considered as having a 40% deposit, enabling them to access mortgage rates normally reserved for those borrowing only 60% of the property’s value – known as 60% loan-to-value (LTV) rates.
To ensure responsible lending practices, Barclays has capped lending at 90% of the full open market value of the property. This means that, while the bank can technically lend up to 100% of the discounted price, it must ensure the total loan does not exceed 90% of what the home is deemed to be worth on the open market.
However, there are exceptions in the case of high-value homes. Buyers of properties priced over £640,000 for houses or £310,000 for flats will still need to contribute a deposit. In these cases, Barclays will lend up to 85% of the discounted value, providing the total loan does not surpass 80% of the property’s market value.
Lee Chiswell, Head of Mortgages at Barclays, commented: “The Right to Buy scheme has long been a crucial route to home ownership 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.”
Rather than creating separate mortgage products specifically for RTB buyers, Barclays has opted to make its entire mortgage range available to qualifying customers. This gives RTB applicants access to the same interest rates and terms offered to other borrowers within the same LTV bands.
The zero-deposit move forms part of Barclays’ broader efforts to improve mortgage accessibility and support first-time buyers. Recent changes have also included the introduction of its “mortgage boost” option, which allows friends or family members to increase the borrowing capacity of an applicant without needing to provide cash gifts or guarantees.
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The timing of Barclays’ announcement coincides with wider developments in the mortgage market. The Financial Conduct Authority (FCA) is currently reviewing its expectations for mortgage lending, with a view to simplifying regulations and making borrowing more accessible for a greater number of people.
As rising house prices and the ongoing cost of living crisis continue to put pressure on prospective homeowners, initiatives like Barclays’ zero-deposit RTB offer may provide a welcome lifeline. It could prove particularly beneficial for long-term tenants who have paid rent for decades but struggled to save for a deposit, despite being otherwise financially stable.
Housing campaigners have cautiously welcomed the news, though some experts have urged that adequate safeguards remain in place to ensure borrowers are not overextending themselves.
For many, however, this latest offering from Barclays marks a hopeful step toward bridging the gap between renting and owning in an increasingly challenging housing market.
