First-time buyers will have a wider choice of mortgage options to choose from following the launch of a new deal from Lloyds Banking Group aimed at helping those with a £5,000 deposit to get onto the property ladder.
The deal, available through Lloyds Bank, Halifax and Bank of Scotland, is one of the latest attempts by lenders to tackle one of the biggest barriers facing aspiring homeowners, saving for a deposit. According to Lloyds, almost two-thirds (64%) of aspiring first-time buyers see building a deposit as the hardest part of buying a home.
Amanda Bryden, head of mortgages at Lloyds, said: “We hear time and again from those who are doing everything right – paying their bills, managing their money well, putting aside what they can – but still feel locked out of home ownership because saving a big enough deposit seems impossible. The reality is that many would-be buyers are already paying as much in rent as they would on a mortgage.”
Who can apply?
The new mortgage is available to borrowers purchasing properties worth up to £300,000 and allows them to borrow up to 98% of the property’s value. The rate is fixed for five years, with no arrangement fee, and borrowers can opt for a term of up to 40 years. The deal is open to both employed and self-employed buyers, subject to affordability checks.
The launch adds another option to a growing market of low-deposit mortgages, however, while Lloyds’ new mortgage could help some buyers purchase sooner than expected, it will not work for everyone.
One of the key limitations is the £300,000 property price cap, which may restrict options in more expensive parts of the UK where house prices are higher. Borrowing is also capped at 4.5 times income, meaning some applicants may be able to borrow less than they could with lenders offering higher income multiples. Buyers relying on financial support from family are also excluded, along with those purchasing new-build homes or shared ownership properties.
However, while this deal may not be for right every first-time buyer, having more low-deposit options should help more people who have steady incomes, but limited savings, take their first step onto the property ladder.
