Building society reintroduces 10% deposit deals for first-time buyers

A building society has reintroduced 10% deposit deals for first-time buyers at a time when the market has been getting tougher for people seeking low-deposit mortgages.

Yorkshire Building Society said that its lending for borrowers with a 10% deposit was temporarily paused earlier this month following unprecedented demand which impacted service levels.

But now it is offering 10% deposit deals exclusively to first-time buyers once more.

The relaunched products will only be available where at least one applicant is a first-time buyer. This means they must never have owned a property or held a mortgage before.

The 10% deposit range includes a five-year fixed rate at 2.99% with £495 product fee and free valuation; a higher five-year rate of 3.09% but with no product fee; and a five-year fixed rate at 3.14% which comes with a £495 product fee but also a free valuation for loans between £500,000 and £600,000.

The Society has also made some rate reductions elsewhere in its mortgage range.

Some lenders have become more cautious about offering loans to borrowers with low deposits, amid concerns that potential house price falls in the difficult economy may push some borrowers into negative equity.

Property website Zoopla said this week that it expects property price falls to come towards the end of 2020 and into early 2021, following an initial upward bounce in house hunter demand as the coronavirus lockdown eases.

Benjamin Merritt senior manager, mortgages at the Yorkshire, said: “After a brief withdrawal, we are pleased to come back to the market with this exclusive range for first-time buyers.

“We know the current market is increasingly challenging for those keen to get started on the property ladder, but hopefully our longer-term fixed rates enable borrowers to manage their finances and secure the home they want.”

Eleanor Williams, a finance expert at Moneyfacts.co.uk, said: “As first-time buyers are integral to keeping the mortgage market moving forwards, it is very positive to see that providers are again starting to relaunch products in these higher LTV (loan-to-value) tiers so favoured by first-time buyers, especially at a time when savings rates could make increasing levels of deposit difficult.

“There has been concern regarding uncertainty around house price falls and therefore potential negative equity situations, making lenders understandably more cautious about lending in these higher-risk circumstances.

“Lenders have also found that they have been overwhelmed by the level of demand for these brackets of products, resulting in some needing to withdraw deals only recently relaunched in order to manage their service levels.

“Consumer demand is clearly evident, and the reintroduction of more mortgage deals for those with a 10% deposit, or even less, by more lenders would hopefully provide prospective purchasers with the choice they need to move forwards with buying their first home.”