New 99% mortgage product aimed at first-time buyers

Yorkshire Building Society has launched a new 1% mortgage aimed at helping first-time buyers on the property ladder has launched.

The fee-free deal will allow homeowners to borrow up to 99% of the property’s value, up to £500,000, with deposit of just £5,000.

Launched yesterday, it will be available directly to customers and via brokers through Accord Mortgages, the lender’s intermediary-only arm.

However, the mortgage, subject to a borrowing rate of 5.99%, is not available for new-build properties or flats, and the maximum age at the end of mortgage term is 70.

While low-deposit mortgages are not for everyone, some industry commentators feel that they do have a place in the market.

Rightmove’s Matt Smith said: “It’s encouraging to see lenders continuing to try to innovate in the mortgage market, even after the government abandoned its own plans to encourage lower deposit mortgages in the Spring Budget. This new product has the potential to help some first-time buyers who fit the affordability criteria, but are struggling to raise a bigger deposit.

“The game-changer for first-time buyers will be an innovation, or regulatory changes, that helps with the challenge of raising a deposit, and being able to borrow enough from a lender, and there should be support for lenders who are trying to break the mould to help more would-be first-time buyers onto the ladder.”

John Charcol, mortgage technical manager at John Charcol, commented: “Those that would benefit from such a deal are likely to be high earners and prospective buyers with a good credit score that just simply haven’t been able to save a deposit amid high rents”.

He added: “That said, while it’s encouraging to see lenders launch new products and expand their existing criteria sometimes these don’t always have the same impact especially when we consider comparable options in the market which help borrowers overcome affordability and/or deposit barriers.”