A new £5,000 deposit mortgage for first-time buyers has been rolled out by Yorkshire Building Society.

This scheme could mean possible homeowners are able to borrow up to 99% of the property value. According to Yorkshire Building Society, their fee-free deal will help first-timers with a £5,000 deposit to buy a property valued at up to £500,000.

For an average first-time buyer house costing £200,000, a £5,000 deposit would makeup 2.5% of the price tag, borrowing then the remaining 97.5% as a mortgage.

The new mortgage is not only available directly from Yorkshire Building Society but also through brokers via Accord Mortgages Yorkshire’s intermediary-only arm. Ben Merritt, director of mortgages at Yorkshire, explained that their research suggests £5,000 could be the magic figure that helps first-time buyers secure a mortgage quicker.

Moreover, he added, it could offer support and a “level playing field for those who don’t have financial support from their families to fall back on”. This offer, which is eligible to first-time buyers exclusively, implies that borrowers with a minimum deposit of £5,000 can secure a five-year fixed-rate mortgage at 5.99%.

Borrowers must be under the age of 70 at the end of the mortgage term. The mortgage won’t apply to new-build properties or flats, and Yorkshire stressed that loans will have to meet strict credit scoring and affordability measures.

Mr Merritt said: “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. We have a duty to encourage financial responsibility in anyone taking out a mortgage.”

Research by the society shows that 38% of first-time buyers receive financial help from family and friends to get on the property ladder.

“The society’s research among 500 first-time buyers for its Home Truths report, published in September 2023, showed that 78% of people in this category feel homeownership is becoming an elite privilege while 63% believe the UK is in danger of becoming a nation of renters.”

Other lenders also offer support for aspiring homeowners who are struggling to save for a deposit. Skipton Building Society has a “track record” mortgage, which can help renters to get on the property ladder, potentially with no deposit needed, subject to terms and conditions. Skipton use borrowers’ records of rental payments to help work out what they may be able to borrow.

Some lenders offer deals where family members put up savings as security for a certain time period such as Barclays’ family springboard mortgage. payment histories to determine their potential borrowing capacity.

Additionally, some lenders offer options where family members can contribute savings as security for a specific period, such as Barclays’ family springboard mortgage. New homeowners can now use their regular payments to services like Netflix or Spotify to improve their chances of getting a mortgage.

Leeds Building Society has teamed up with Experian to allow extra evidence of a borrower’s good financial track record to be factored into lending decisions.

Rachel Springall, a finance expert, said: “This new deal from Yorkshire Building Society will no doubt be popular among aspiring buyers who can’t get their deposit to stretch far enough to get on to the property ladder. The mortgage market could always do with more innovation to support first-time buyers, so it will be interesting to see if any other lenders follow suit.”

“Anyone who borrows at a higher loan-to-value would be wise to overpay their mortgage whenever they can to gain more equity and aim to reach a lower loan-to-value bracket where cheaper deals could be found when they come to refinance.”

“If there are any concerns about falling into negative equity with a high loan-to-value deal, borrowers must speak to their lender and seek advice immediately.”

She continued: “Due to the cost o living, aspiring homeowners may find it difficult to make bigger monthly savings towards a deposit, especially if they are spending a large portion of their salary on rent.”

Sarah Coles from Hargreaves Lansdown said: “Cutting down on non-essential outgoings is wise but buyers also need to be conscious of any hikes to their utility bills or the cost of commuting in the months ahead. Seeking a longer-term fixed mortgage may be a better choice for borrowers looking for peace-of-mind with their monthly repayments.”

She also highlighted the value of independent financial advice and checking eligibility criteria. could provide peace of mind with monthly repayments and recommended seeking independent financial advice and checking eligibility criteria.