Yorkshire Building Society Launches Innovative Mortgage Product

In a bold move, Yorkshire Building Society has introduced a fee-free mortgage with a deposit requirement of just £5,000. This product allows borrowers to purchase properties worth up to £500,000, making it an attractive option for first-time buyers.

A Game-Changer for First-Time Buyers

The mortgage comes with a five-year fixed rate of 5.99% and is available through Accord Mortgages, the lender’s intermediary arm. While it cannot be used for new builds or flats, this product is a significant step forward in making homeownership more accessible.

“While £5,000 represents a 1% deposit for those who need to borrow the maximum amount available, 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 for a £5,000 deposit mortgage.” - Ben Merritt, Director of Mortgages at Yorkshire Building Society

A Balanced Approach

Mark Harris, Chief Executive of mortgage broker SPF Private Clients, welcomes the innovation but notes that borrowers will still need to pass stringent affordability assessments and credit scoring. He also highlights the exclusions, such as no flats or new-builds, and the maximum property value limit of £500,000.

“Ideally, there would be no need for borrowers to take on high levels of borrowing. However, not everyone has access to the Bank of Mum and Dad, and is it fair that if you are not in this position you can never realistically afford to get on the housing ladder but must rent indefinitely?” - Mark Harris

A Risk Worth Taking?

While some may question the wisdom of borrowing at 99% loan-to-value, Harris argues that the threat of negative equity is greater the higher the level of borrowing. However, with only five-year products available, the value of the property is likely to increase over time, and borrowers will be paying back a small amount of the capital as well as interest each month, improving their equity stake.

Applying for a mortgage just got a little easier

A New Era for First-Time Buyers?

As the UK housing market continues to evolve, innovative products like this one from Yorkshire Building Society are a welcome development. While there are risks involved, the benefits of homeownership cannot be overstated. As Harris so aptly puts it, “Not everyone can move back in with Mum and Dad.”

The dream of homeownership is within reach