New £5,000 Deposit Mortgage Policy Allows Homeowners to Borrow up to 99%

A new mortgage policy by Yorkshire Building Society is now allowing hopeful homeowners to borrow up to 99% of their property’s worth with a £5,000 deposit. This fee-free deal is specifically designed for first-time buyers in England, Scotland, or Wales who have at least £5,000 to put down as a deposit and are looking to purchase a property worth up to £500,000.

For instance, for a typical first-time buyer property priced at £200,000, a £5,000 deposit would account for 2.5% of the purchase price, with the remaining 97.5% to be borrowed as a mortgage. This new mortgage option is available directly to clients and through brokers via Accord Mortgages, the lender’s intermediary-only division.

Ben Merritt, Yorkshire Building Society’s director of mortgages, highlighted that the £5,000 deposit requirement could potentially expedite the process for first-time buyers to become mortgage-ready. This move aims to level the playing field for individuals who do not have financial support from their families. The 5.99% five-year fixed-rate mortgage requires a minimum deposit of £5,000 and is exclusively accessible to first-time buyers, with a maximum borrower age of 70 at the end of the mortgage term. However, the mortgage is not applicable for new-build residences or apartments, and rigorous credit and affordability checks apply.

Merritt emphasized the importance of financial responsibility, stating, “Customers must show strong creditworthiness and pass an affordability assessment to qualify for a £5,000 deposit mortgage.”

Recent social studies have shown that approximately 38% of first-time buyers rely on financial assistance from friends and family to enter the housing market. Yorkshire Building Society’s research revealed that 78% of first-time buyers believe homeownership is becoming an elite privilege, with 63% expressing concerns about the UK turning into a nation of renters.

In response to the growing need for innovative solutions to help potential homeowners save for a deposit, other lenders like Skipton Building Society offer unique mortgage options. Skipton’s “track record” mortgage enables renters to transition to homeownership without a deposit, using rental payment data to determine borrowing capacity. Additionally, some lenders offer agreements where family members provide savings as collateral for a specified period, such as Barclays’ family springboard mortgage.

Overall, these initiatives aim to make homeownership more accessible and inclusive for individuals aspiring to step onto the property ladder.