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£5k Deposit Mortgage

New £5,000 Deposit Mortgage Scheme for First-Time Buyers

A new initiative enables first-time buyers across England, Scotland, and Wales to purchase a property with a deposit as low as £5,000, allowing them to borrow up to 99% of the property’s value.

This scheme, currently offered by Yorkshire Building Society, supports the purchase of properties valued up to £500,000 with just a 1% deposit.

The aim of this scheme is to make homeownership more accessible by reducing the initial financial barrier, thereby assisting ‘generation rent’ in stepping onto the property ladder with a more affordable and easily saved deposit.

Research by Yorkshire Building Society revealed that about two in five first-time buyers receive financial assistance from friends and family to enter the housing market.

Ben Merritt, Yorkshire’s director of mortgages, highlighted that this new scheme could help create a “level playing field for those who don’t have financial support from their families to fall back on,” thus supporting individuals who cannot rely on family financial assistance.

Lenders Offering the £5k Deposit Mortgage Scheme in the UK

The £5k Deposit Mortgage Scheme is specifically designed to help first-time buyers get onto the property ladder with a minimal deposit. Currently, the main lender offering this scheme is Yorkshire Building Society (YBS).

Yorkshire Building Society (YBS)

YBS has launched a mortgage product that allows first-time buyers to secure a home with a deposit as low as £5,000, equating to 1% of the property’s value. Here are the key details:

  • Minimum Deposit: £5,000
  • Maximum Property Value: £500,000
  • Loan-to-Value (LTV): Up to 99%
  • Fixed Interest Rate: 5.99% for five years
  • Eligibility: Available only to first-time buyers; not applicable for flats or new-build properties; must be in England, Scotland, or Wales (not available in Northern Ireland)
  • Maximum Borrower Age: 70 at the end of the mortgage term

This mortgage aims to reduce the time needed to save for a deposit, particularly benefiting those without financial support from family. YBS offers this product directly to customers and through their intermediary brand, Accord Mortgages.

Am I Eligible?

The £5,000 deposit scheme is exclusively available to first-time buyers. Buyers with a minimum deposit of £5,000 can secure a five-year fixed-rate mortgage at 5.99%, which is slightly higher than the current average five-year fixed rate of 5.34%.

This mortgage is not available for new-build properties or flats, and loans are subject to thorough credit score and affordability checks. Additionally, the maximum age for a borrower at the end of the mortgage term is 70 years old.

Potential Risks

For those borrowing a high mortgage amount, it is advisable to make overpayments whenever possible. Overpayments can help improve equity and lower the loan-to-value (LTV) ratio.

A high LTV ratio poses a significant risk if the property market declines, as the mortgage could end up exceeding the property’s value, leading to negative equity.

Negative equity occurs when the outstanding mortgage amount is greater than the property value. This situation is best avoided, as it can result in owing more than the home’s worth, making it challenging to sell or remortgage the property.

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