Yorkshire BS Offers First-Time Buyer £5,000 Deposit Deal At 5.99% – Forbes

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27 March: Loans Available Up To 99% Of Value

Yorkshire Building Society is launching a deal for first-time buyers that enables them to get on the housing ladder with just a £5,000 deposit, writes Jo Thornhill.

The five-year fixed rate loan, available to first-time buyers, has a 5.99% interest rate with no product fee. 

Yorkshire will accept applications from borrowers in England, Scotland and Wales who have a £5,000 cash deposit and are looking to purchase a house worth up to a maximum of £500,000. It means borrowers can potentially borrow up to 99% of a property’s value.

The deal is not available for the purchase of flats or new-build properties, and the society has said loans are subject to rigorous credit scoring and affordability checks.

For someone buying a typical first-time buyer property at £200,000, a £5,000 deposit would equate to 2.5% of the purchase price, with the remaining 97.5% being borrowed.

The deal is available direct to customers and via brokers through Accord Mortgages, the lender’s intermediary-only arm.

Ben Merritt, Yorkshire’s director of mortgages, said requiring a £5,000 deposit could shorten the time needed for first-time buyers to get mortgage-ready and “encourage a level playing field for those who don’t have financial support from their families to fall back on”.

David Hollingworth, at broker L&C Mortgages, said: “It’s nice to see a bit of innovation and, although it won’t work for everyone, it brings another alternative for hard-pressed first time buyers. 

“It won’t work for those that can’t afford the mortgage, but will be perfect for those that can afford to take on a mortgage but are hampered by the need to save a bigger deposit. It could therefore accelerate the ability to buy, giving security of tenure and avoiding the frustration of house prices potentially moving further out of reach while people are saving.

“Borrowing at a high loan to value naturally will bring a risk that prices could drop back but the five-year fixed rate deal should help to see the mortgage reduced over time and defend against that.”

While there is some limited choice of deals for borrowers with a 5% cash deposit along with schemes for first-time buyers such as shared equity and shared ownership loans, guarantor mortgages and the deposit unlock scheme (for borrowers purchasing a new-build home with a 5% deposit), deals for borrowers with no deposit are rare.

Skipton building society launched its Track Record mortgage to help first-time buyers last year. The 100% mortgage is available for first-time buyers who don’t have a cash deposit saved but who have been renting and can demonstrate a 12-month track record of rental payments. 

The deal does not require a guarantor, is fee-free and has a five-year fixed rate at 5.45%. The amount first-time buyers can borrow is capped as monthly mortgage payments can’t be more than the average monthly rent.

Based on a typical monthly rent of £1,290 (with an applicant borrowing at 100% loan to value with an interest rate of 5.45% over a 35-year mortgage term), Skipton could potentially lend up to about £241,000 for home purchase.

Santander has cut a range of its residential and buy-to-let fixed rate deals by up to 0.21 percentage points, effective from tomorrow (28 March). Santander has consistently offered competitive rates for home purchase and remortgage in recent months, and this latest rate cut could see them back at the top of the best buys. It is currently offering a five-year fixed rate for remortgage at 4.45% at 60% LTV with a £999 fee.

26 March: Market Continues To Respond To Bank Rate Hold

HSBC is changing selected fixed rate deals for new borrowers and existing customers from tomorrow (27 March). Its deals at higher loan-to-value ratios will be reduced, while rates on lower LTV deals are set to rise.

It comes as other lenders, including Barclays, The Mortgage Works (part of Nationwide building society) and Bank of Ireland have cut selected rates. 

HSBC has said it will shave selected rates on two, three and five-year fixed rates for home purchase at 90% to 95% LTV….