First-time buyers are being offered the chance to pay a modest £5,000 deposit and potentially borrow up to 99% of a property’s value.
The mortgage from Yorkshire Building Society is valid on places up to £500,000 and comes without a fee – but there are a few key exceptions.
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It’s not available for flats or new-build properties and would-be borrowers must pass strict affordability and credit scoring checks.
The task of saving for a deposit is one of the barriers that many first-time buyers struggle with as most lenders like a minimum 10% up front.
Yorkshire Building Society’s mortgage director, Ben Merritt, said its research suggested £5,000 was the sum that could help young people get on the property ladder.
He said it could help produce a “level playing field for those who don’t have financial support from their families to fall back on”.
Buyers need at least £5,000 as a deposit under the deal, which offers a five-year fixed interest rate of 5.99%.
The building society isn’t the only lender to offer deals aimed at first-time buyers, with 5% deposit deals available elsewhere. However they often come with higher interest rates.
With a small deposit, there is also a greater risk of falling into negative equity – owing more than your home is worth – if a property falls in value.
Skipton Building Society is another lender that has launched a product for first-time buyers.
Its track record mortgage looks at previous rent payments to assess what a person may be able to borrow – and a deposit is not required.
Again though, there are restrictions that mean new-build flats are excluded.
