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£5k deposit mortgage for first time buyers: in detail

£5k mortgage: image depicts a line of houses in the UK, one with a for sale sign in front of it.

George Square has access to a lender that has just launched a new £5k mortgage product that will allow first-time buyers to pay a minimum of £5,000 deposit– and borrow up to 99% of the property value.

Welcome news for first time buyers

The new product will no doubt be welcome news for first time buyers struggling to save a larger deposit in the current “cost of renting crisis”, who may feel stuck in the rental cycle and unable to get on the housing ladder.

Average monthly rent paid by tenants in the UK rose by 9% in the year to February, according to latest figures from the ONS – the highest annual increase since records began in 2015.

Key details: at a glance

  • Minimum deposit is £5,000
  • Minimum loan size is £95,001
  • The minimum property price is £100,001 and the maximum property price is £500,0000
  • Maximum Loan to value (LTV) is 99%
  • The loan is a 5-year fixed rate at 5.99%
  • It is only available for first-time buyers who will be a maximum of 70 years old at the end of the mortgage term
  • This mortgage is only for residential house purchases, not new build property or flats
  • Applicants will be required to pass strict credit scoring and affordability checks

Levelling the playing field

The new product follows separate research for Yorkshire Building Society, which shows that 38% of first-time buyers receive financial help from friends and family to step on to the housing ladder. It is hoped that offering 99% mortgages could shorten the time needed for first-time buyers to get mortgage-ready and help to encourage a level playing field for those who don’t have financial support from their families to fall back on.

£5k mortgages: potential pitfalls to keep in mind

While a 99% mortgage will be a lifeline to many first time buyers, it’s important to keep in mind some of the risks associated with them:

– Negative equity

With a 99% mortgage, there is a greater chance of slipping into negative equity, which occurs when your property is valued at less than the remaining amount of your mortgage. This typically happens due to fluctuations in the market, causing house prices to move up and down. The smaller the deposit you put down, the lower your initial equity, increasing the risk of negative equity. 

– Interest rates

Having a larger deposit typically leads to better interest rates, as you are perceived as more financially reliable by the bank, resulting in smaller monthly mortgage payments. With 99% mortgages allowing for such a small deposit, you are less likely to secure the best interest rates.

Professional, independent advice for first time buyers

Taking the first step onto the property ladder can be overwhelming; searching the market for the best mortgage deal and lender that’s right for you can feel like a minefield. Our independent mortgage advisers at George Square can help alleviate some of the pressure involved in buying your first home and help you secure a mortgage that’s right for you.

Whilst the new product refers to the new product as a £5k mortgage it should be clear that a mortgage of 95% to 99% is required depending on the purchase price of the property, the lower the purchase price the greater the percentage deposit required.



For a free consultation, please contact George Square’s mortgage specialist Phil Browne on 0115 947 5545 or contact us online here.

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