Lloyds Banking Group will launch a £5k deposit first-time buyer mortgage, effective 18 May.

The new mortgage is available across Lloyds, Halifax and Bank of Scotland and is available on homes worth up to £300,000.

The five-year fixed product has a rate of 5.89% and has no fee. It is open to employed and self employed and at least one applicant must be a first-time buyer.

Halifax Intermediaries and Scottish Widows Bank head Amanda Bryden says: “We regularly get feedback from brokers that first time buyers find getting a deposit together one of the main barriers to them buying a home and today we are taking another step to help them get past that.”

“We recognise our responsibilities as a lender to ensure loans are affordable – not just now, but in the future for all our borrowers. With this new offer, brokers have a new option for buyers who have shown their ability to manage their finances, save for a deposit themselves and who are taking the greater certainty of a longer-term fixed rate.”

“A lower deposit can make it easier to save for a deposit for many, or it can help free up cash for other costs, like conveyancing or setting up your new home the way you want it.”

Also commenting on the announcement, L&C Mortgages associate director David Hollingworth says: “We know that first time buyers can struggle to amass a deposit big enough to make buying a reality. High rents can make it a slog to reach the minimum 5% deposit that most mortgages demand and the Bank of Mum and Dad isn’t an option for everyone.”

“This new launch is significant as it marks another major high street lender developing solutions for those with a small deposit. We’ve seen a growing range of lenders in this space, designing products that could significantly speed up the journey to home ownership.”

“There are now several deals where it could be possible to borrow more than 98% of the purchase price or even require no deposit at all. This will help those that have good affordability but are being held back by the need for the traditional deposit of 5% or more. On a £300k purchase price this could mean a deposit of £5k, rather than £15k.”

“It won’t necessarily work for everyone and doesn’t combine with the higher lending multiples that lenders can now offer. The purchase price cap of £300k is at a level that may dent eligibility in regions where prices are highest and those able to scrape a bigger deposit together will open up cheaper rates.”