New £5,000 deposit mortgage launched

A £5,000 deposit mortgage for firsttime buyers has been launched by a building society, enabling aspiring homeowners to borrow up to 99 per cent of the property value.

Yorkshire Building Society said its new fee-free deal will enable firsttime buyers across England, Scotland or Wales with a £5,000 deposit to purchase a property valued at up to £500,000.

For someone buying a typical firsttime buyer property at £200,000, a £5,000 deposit would equate to 2.5 per cent of the purchase price, with the remaining 97.5 per cent being borrowed as a mortgage.

The Yorkshire’s director of mortgages, Ben Merritt, said research by the society indicates that this could shorten the time needed for firsttime buyers to get mortgage-ready.

He added that it could help to encourage a “level playing field for those who don’t have financial support from their families”.

Under the deal, borrowers with a deposit of at least £5,000 could take out a five-year fixed-rate mortgage at 5.99 per cent.

The mortgage is not available for new-build properties or flats, and the society said loans are subject to rigorous affordability checks.

Mr Merritt said: “While £5,000 represents a 1 per cent deposit for those who need to borrow the maximum amount, the key is that customers are still putting money into a deposit, they still have to demonstrate strong creditworthiness and pass an affordability assessment to be eligible”

The new mortgage deal is likely to benefit high earners with a good credit score but who are struggling to save for a deposit, according to Nicholas Mendes, from the brokers John Charcol.