Yorkshire Building Society has launched a £5,000 deposit mortgage to help tackle one of the biggest issues preventing people from achieving homeownership.
The mortgage is available directly to customers and via brokers through Accord Mortgages – the lender’s intermediary-only arm.
The product enables first-time buyers with a £5,000 deposit to purchase a property valued up to £500,000.
Yorkshire BS director of mortgages Ben Merritt said painstaking research conducted by the society showed that £5,000 was the magic amount which would shorten the time needed for first-time buyers to get mortgage-ready and make it fairer no matter where they live in the country.
“Our analysis showed a deposit of £5,000 – compared to a typical 5% – would make a huge difference to first-time buyers across the country by reducing the time it takes them to save up and achieve homeownership, from a maximum of 7.5 years (in London), to around 2.5 years,” Merritt explained.
£5k Deposit Mortgage product details at a glance
- Five-year fixed rate at 5.99%
- Available to first-time buyers only
- Minimum deposit requirement £5,000
- Maximum property value £500,000
- Available on a capital and interest basis only
- Maximum age at end of mortgage term 70
- Available on residential house purchases only – not available for new-build or flats.
Yorkshire BS director of mortgage distribution and managing director at Accord Jeremy Duncombe (pictured) said there were products already on the market that suited first time buyers supported by the bank of mum and dad, but the Yorkshire £5k deposit mortgage was not aimed at them; but at those with no additional financial support source. “For these people, this mortgage provides access to the housing market earlier than ever before.”
L&C Mortgages associate director David Hollingworth said the Yorkshire deal offers something different for those stepping onto the property ladder.
“First time buyers face the dual challenges of affordability and raising a deposit. This product will offer an important alternative for those that can meet affordability criteria but find saving for a chunky deposit a major barrier.
“With rents continuing to rise sharply this product could markedly accelerate the ability to buy for the right person, enabling more first-time buyers to take the first step on the ladder”.
He added: “Applying the same scoring and affordability as for standard 95% borrowing should help to make the product easy to understand and the need for advice will ensure that borrowers will understand the full range of options”.
John Charcol mortgage technical manager at John Charcol weighed up the pros and cons of the Yorkshire deal.
“YBS is the latest lender in the market to launch a new product supporting the first-time buyer market with the tag line of ‘£5k deposit on properties purchases valued at up to £500,000’, though not available for new-build properties or flats.
“Those that would benefit from such a deal are likely to be high earners and prospective buyers with a good credit score that just simply haven’t been able to save a deposit amid high rents”.
He added: “That said, while it’s encouraging to see lenders launch new products and expand their existing criteria sometimes these don’t always have the same impact especially when we consider comparable options in the market which help borrowers overcome affordability and/or deposit barriers.
“For example, Skipton Track record mortgage, Barclays springboard or even the recent Own New proposition all support the first-time buyer & home mover market with less caveats and in some cases cheaper rates”.
