First-Time Homebuyers Get Ready: Yorkshire Building Society Launches up to a 99% Mortgage.
In a bid to ease the burden on first-time homebuyers struggling to save hefty deposits, Yorkshire Building Society (YBS) and its intermediary arm, Accord Mortgages, have unveiled an innovative mortgage scheme with a minimum deposit requirement of as little as 1% (subject to a minimum deposit of £5000).
Will this mortgage product revolutionise the property market landscape? Probably not. It does provide a glimmer of hope for aspiring homeowners across Britain; however, it may not be all it’s cracked up to be.
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So what is the headline?
YBS and Accord have today launched a five-year fixed-rate mortgage with a minimum deposit of £5000. Yorkshire Building Society’s initiative marks a significant departure from traditional mortgage requirements. Requiring a mere £5000 minimum deposit, eligible buyers can now step onto the property ladder with relative ease, although it comes with stringent criteria. This move is a testament to the lender’s commitment to fostering accessibility and inclusivity within the housing market and supporting first-time buyers to become homeowners. Of course, there will be those naysayers who talk of pumping house prices, etc.; however, we need to remember that it’s not a lender’s job to fix the planning system, build houses or determine government housing policy. There’s much they can’t do and only limited reach with that they can do.
So, let’s get into the nitty-gritty of it. (The below is taken straight from the Accord criteria and may be subject to change)
Who’s it for?
- At least one applicant must be a first-time buyer (defined as never having owned a property in the past) and have no background properties on the application
- Applicants with a minimum £5K deposit – immediate family members can provide gifted deposits
- Applications that achieve the higher credit score required for lending above 95% LTV
What Else Do You Need To Know?
- 5 Year Fixed Rate product
- Maximum age of 70 at the end of the mortgage term
- Available for Loan To Values (LTV) between 95.01% LTV and 99% LTV
- Available for house purchases above £100K up to £500K
- Minimum loan above £95K
- Maximum loan £495K
- Maximum Loan to Income 4.49
- Maximum term 40 years
- Only available for Capital & Interest
- Available for new house purchase business only
- Subject to affordability, criteria and credit score
Excludes:
- Purchases of flats, new builds and properties in Northern Ireland
- Not available for applications where any applicant does not have permanent right to reside in the UK
- Not available for Joint Borrower Sole Proprietor, Cascade Score or Boost LTI
At first glance, the prospect of securing a home with such a minimal deposit seems too good to be true. However, YBS emphasises that stringent affordability checks will still be conducted to ensure borrowers can comfortably manage their repayments. While this mortgage option may not be applicable to new builds or flats, its potential impact on accelerating the homeownership journey for many first-time buyers shouldn’t be discounted.
One of the most significant advantages of this new mortgage offering is its potential to expedite the path to homeownership for first-time buyers. With conventional mortgage requirements demanding deposits of at least 5%, many first-time buyers find themselves trapped in a cycle of prolonged renting and saving, struggling to bridge the ever-widening gap between their aspirations and financial reality. By reducing the deposit threshold to just £5000, YBS and Accord are effectively removing a significant barrier that prevents many first-time buyers from buying their first home.
The soaring property prices in the UK have long posed a huge challenge for prospective first-time buyers. According to data from the Office for National Statistics, the average property price stands at over £280,000, a figure that continues to climb steadily if the house price indices are to be believed. Consequently, the average first-time buyer deposit has shot up in recent years, making it impossible for many. Against this backdrop, the introduction of this low-deposit mortgage product comes as a sign of hope, offering a lifeline to those facing difficulty with the task of saving the deposit needed to take that first step.
This initiative underscores a broader trend within the banking and lending sector towards innovation and flexibility. Recognising the evolving needs and financial constraints of prospective homeowners, banks and building societies are having to think creatively about ways to help people in their mortgage product offerings. With mortgage rates remaining relatively high in comparison to the past decade and property prices seemingly impervious so far to higher rates, devising these types of mortgage products may prove to be a step in the right direction.
The Risks
While the £5000 deposit mortgage may allow more first-time buyers to purchase their first home, it is not without its downsides. There are obvious and clear dangers. It increases the possibility of negative equity where the value of the mortgage exceeds the value of the home if house prices fall. And with fixed rates carrying hefty penalties to break the contract during the fixed rate period, young couples who separate may find themselves unable to sell without significant financial pain. Higher deposit requirements serve as a safeguard against negative equity, protecting both lenders and borrowers from the adverse repercussions of reducing property values. As such, the test of this new mortgage model hinges on robust risk assessment frameworks and strict lending practices.
While the eligibility criteria and affordability checks are stringent to ensure the long-term sustainability of the product for the lender and borrowers alike, it’s important that borrowers enter into mortgage agreements with a clear understanding of their financial obligations and capacity to repay. Responsible lending practices are essential, and anyone considering this type of product needs to think very carefully about the possible downsides. It’s not going to be for everyone; however, for some, it may be the lifeline to get them out of the private rental market and into a place to call home.
In conclusion, Yorkshire Building Society and Accord’s unveiling of the 99% mortgage product represents a significant change of direction. By reducing the deposit barrier and fostering greater accessibility, it has the potential to redefine the timescales first-time buyers need to wait before purchasing their first home.
THINK CAREFULLY ABOUT SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME (OR PROPERTY) MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
