First home buyer mortgage launched with deposit of £5,000, limit of £500,000

First time buyers have the opportunity to pay a modest deposit of £5,000, with the possibility of borrowing up to 99% of the property’s value.

this mortgage Licenses issued by Yorkshire Building Society apply to places worth up to £500,000 and are free – but there are some important exceptions.

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It is not available for apartments or new-build properties, and potential borrowers must pass strict affordability and credit score checks.

Saving money is one of the hurdles many first-time homebuyers face, as most lenders prefer a down payment of at least 10%.

Ben Merritt, director of mortgages at Yorkshire Building Society, said its research showed £5,000 could help young people get onto the property ladder.

He said this could help “level the playing field for those who don’t have the financial support of their families”.

Under the deal, buyers will need a deposit of at least £5,000, with a five-year fixed rate of 5.99 per cent.

Building societies aren’t the only lenders offering deals for first-time buyers, with 5% deposit discounts also being offered elsewhere. However, they usually have higher interest rates.

With a smaller deposit, there is also a greater risk of falling into negative equity, where you owe more than the home is worth, if the property loses value.

Skipton Building Society is another lender launching a product for first-time buyers.

Its mortgage history assesses what a person can borrow based on previous rent payments, and no deposit is required.

However, there are some restrictions which mean new-build apartments are excluded.

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Rachel Springall of Moneyfactscompare.co.uk said Yorkshire mortgages are likely to be popular with first-time buyers and it will be interesting to see if others launch similar deals.

However, she warns that larger deposits are always better and should be cheaper in the long run.

“Anyone borrowing at a higher loan-to-value ratio would be wise to overpay on their mortgage to gain more equity and aim for a lower loan-to-value ratio so that they can find a cheaper deal when refinancing,” St. Ms. Pringle said.

Higher interest rates over the past few years have also made mortgage repayments more expensive, but rates are expected to start falling later this year as Inflation is now close to the government’s 2% target.