YBS LAUNCHES £5000 DEPOSIT MORTGAGE FOR FIRST-TIME BUYERS

Yorkshire Building Society has announced the release of a new product that enables borrowers to take mortgages up to 99% of the value of the property.

The recently introduced product, offered by its Accord mortgage division, is intended for first-time purchasers who are not purchasing brand-new homes or flats. According to what we currently know, the mortgage will be accessible on a 5-year fixed rate contract and will be available up to the age of 70.

This is good news for first-time purchasers who were left on their own after the Help to Buy Scheme ended, especially because the government first informally proposed a 99% mortgage but then dropped the concept. The product does, however, have certain shortcomings. First off, the maximum price of a house is £500,000, and a deposit of at least £5,000 is required. This implies that you would have to be purchasing a home at the product's limit in order to actually put down just 1%. Furthermore, the number of applications that successfully complete the process will be fascinating to watch as applicants will be subject to affordability and credit screening. That being said, considering how brittle the UK property market is, there are risks associated with borrowing at such a high loan to value. If the market rapidly declines, new borrowers can theoretically find themselves in a situation where the loan is worth more than the property.

Yorkshire Building Society is not, however, the first lender to launch high loan-to-value lending after Trussonomics. Although the Track Record Mortgage which allows up to 100% borrowing was introduced by Skipton Mortgages with much hoopla, the product has not proven particularly popular.

Yorkshire Building Society pulled off a fantastic marketing ploy ahead of the Easter bank holiday weekend, but the proof will be in the pudding.

The information in this post is for information purposes only and does not constitute advice.