New mortgage lender Ahauz has launched an equity loan to help first-time buyers with a 5% deposit buy a home.

The firm, which launches today, will lend FTBs an equity loan of up to 25% of the property value. 

Ahauz’s loans sit alongside a traditional mortgage in a similar way to the government’s Help to Buy scheme, however interest rates on these top-up loans start at 6.99%

The London-based firm says typically, FTBs can borrow up to 4.5 times their household income from a mortgage lender. 

But it says its top-up equity loan, taken alongside the primary mortgage, boosts a FTBs borrowing power from 4.5 to 6 times income allowing them to buy a higher value home.

Ahauz co-founder Karthik Srivats says: “A recent market study [by the Equity Release Council in August] concluded that today’s homebuyers could end up £326,000 wealthier over a 30-year period than people who rent, without even considering potential house price growth. 

“Ahauz enables people to move quickly and easily from renting to owning with just a 5% deposit.

“Historically, first-time buyers have struggled to borrow what they need, because interest rates can rise prohibitively once you pass the 75%-80% LTV point. 

“We are effectively boosting their deposit to help them get on the property ladder.

“For some this will mean buying more quickly and moving away from renting, while others will be able to increase their budget and buy the home they really want. 

“This will be particularly valuable in those areas of the country with high property values relative to people’s earnings.”