Mortgage Advice Bureau (MAB) has welcomed the launch of a new Lloyds Banking Group mortgage product allowing some first-time buyers to purchase a home with a minimum deposit of £5,000, describing it as a significant step towards improving access to homeownership.
As Mortgage Soup revealed yesterday the UK’s largest mortgage lender is reducing one of the most persistent barriers to homeownership by introducing a product aimed at first-time buyers struggling to raise a deposit.
Available from 18 May across Lloyds, Halifax and Bank of Scotland brands, the mortgage is open to borrowers purchasing properties valued at up to £300,000, with a maximum loan of £295,000 and a minimum deposit of £5,000.
The 5-year fixed rate product is priced at 5.89% and comes with no product fee, a maximum term of 40 years and a loan-to-income cap of 4.5x. The deal also includes a free Level 1 valuation and is available through both intermediary and direct channels.
STRONG CREDIT PROFILE
The proposition equates to a maximum loan-to-value of 98%, although eligibility is restricted to applicants with a strong credit profile. At least one applicant must be a first-time buyer, while both employed and self-employed borrowers are eligible.
The scheme excludes new build properties, shared ownership purchases and cases involving gifted deposits.
The new mortgage initiative is expected to unlock up to £500m in additional lending and comes amid ongoing affordability pressures and growing challenges for buyers trying to save for larger deposits.
MAB says the move addresses a major knowledge gap among prospective buyers around the availability of low-deposit mortgage products.
POSITIVE STEP
Rachel Geddes (main picture), Strategic Lender Relationship Director at MAB, says: “It’s hugely encouraging to see a major high street lender making such a significant commitment to supporting first time buyers.
“Unlocking up to £500m in additional lending, alongside a £5,000 deposit option, is a positive step towards breaking down some of the barriers preventing aspiring homeowners from getting onto the property ladder.
“This comes at an important time, with our research showing that 73% of prospective buyers are unaware that 5% deposit mortgages even exist, while 39% believe they need at least a 10% deposit to buy a home.
“These misconceptions are preventing many aspiring buyers from realising they may be closer to getting on the property ladder than they think.”
BUY WITH CONFIDENCE
She adds: “Greater visibility and availability of low deposit options will play a key role in helping more renters buy with confidence, while reinforcing the value of speaking to a mortgage adviser to fully understand the support and products available.”
The announcement comes as lenders continue to explore ways of supporting affordability for first-time buyers, particularly as higher mortgage rates and elevated house prices continue to place pressure on deposit requirements and borrowing capacity.
Recent industry data has shown that product availability at higher loan-to-value levels remains constrained compared to earlier in the year, with affordability remaining one of the biggest barriers to homeownership for younger buyers and renters seeking to enter the market.
