Yorkshire Building Society said its new fee-free deal will enable FTBs across England, Scotland or Wales with a £5,000 deposit to buy a property valued at up to £500,000
A new £5,000 deposit mortgage has been launched by a building society, enabling prospective homeowners to potentially borrow up to 99% of the property value.
Yorkshire Building Society said its new fee-free deal will enable FTBs across England, Scotland or Wales with a £5,000 deposit to buy a property valued at up to £500,000.
For someone buying a typical FTB property at £200,000, a £5,000 deposit would equate to 2.5% of the purchase price, with the remaining 97.5% being borrowed as a mortgage.
The new mortgage is available directly to customers and via brokers through Accord Mortgages – the lender’s intermediary-only arm.
The Yorkshire’s director of mortgages, Ben Merritt, noted research by the society suggests that £5,000 is the amount that could shorten the time required for FTBs to get mortgage-ready.
Under the deal, which is available to FTBs only, borrowers with a deposit of at least £5,000 could take out a five-year fixed-rate mortgage at 5.99%.
The maximum borrower age at the end of the mortgage term is 70.
The mortgage is not available for new-build properties or flats, and the society said loans are subject to rigorous credit scoring and affordability checks.
Merritt added: While £5,000 represents a 1% deposit for those who need to borrow the maximum amount available, the key is that customers are still putting money into a deposit, they still have to demonstrate strong creditworthiness and pass an affordability assessment to be eligible for a £5,000 deposit mortgage.
He said: We have a duty to encourage financial responsibility in anyone taking out a mortgage.
Previous research from the society suggests around two in five (38%) FTBs receive financial help from friends and family to have the chance of stepping on to the housing ladder.
Merritt said: The society’s research among 500 FTBs for its Home Truths report, published in September 2023, found that 78% of people in this category feel homeownership is becoming an elite privilege while 63% believe the UK is in danger of becoming a nation of renters.