However, the deal will only be available to first-time buyers and the society will apply stringent conditions on lending
Yorkshire Building Society will become the first lender to relaunch 95% mortgages in the mainstream market, about a year after the Covid crisis spooked lenders into withdrawing low-deposit home loans.
However, the deal will only be available to first-time buyers (FTBs) and the society will apply stringent conditions on lending, including ruling out flats and new-build homes.
The recent budget brought news of a government guarantee scheme to encourage banks and building societies back into the low-deposit mortgage market, which the chancellor said was designed to help generation rent become “generation buy”.
Although the society is not planning to use the scheme, it said it would not have returned to the market without it, because of the anticipated demand from would-be homeowners.
Last year, along with some other lenders operating in the 90% mortgage market, it was forced to place restrictions on applications to manage demand, and offered the loans for just two days at a time on several occasions.
Yorkshire’s 95% deal, which will be offered through mortgage brokers, will have a rate of 3.99% fixed for five years, and comes with a £995 fee.
Yorkshire Building Society’s chief executive, Mike Regnier, said he was confident the lender could shoulder the risk itself, without needing to fall back on government money.
But he said it would not have re-introduced its own low deposit mortgage unless it knew other major banks were about to join the 95% market through the government scheme.
As the only lender in this market we’d struggle to meet the demand that clearly is out there for customers that have saved for years to get a 5% deposit, and will want to take every advantage of the stamp duty land tax holiday, Regnier said.
The mortgages will not be available to borrowers hoping to buy flats or new-build houses, which can be more susceptible to price falls during economic downturns.
It is not planning to restrict applications to certain days or time slots, but its strict criteria – which also exclude furloughed workers – is meant to reduce demand.