Building society introduces novel mortgage plan catering to first-time purchasers with deposits as low as £5,000

Homebuyers granted opportunity with minimal upfront investment; Newcastle Building Society introduces "First Step" mortgage accepting mere £5,000 deposit for initial home purchases.

, and Administrator

2025 September 16 . 2:48 PM

2 min read

Building and loan association introduces mortgage product for inexperienced homebuyers requiring... — Building and loan association introduces mortgage product for inexperienced homebuyers requiring only a modest £5,000 initial deposit.

Building society introduces novel mortgage plan catering to first-time purchasers with deposits as low as £5,000

In a significant move aimed at making homeownership more accessible, Nationwide has launched a 95% mortgage for new build homes. This new offering is set to provide an alternative for buyers who may have found it challenging to accumulate the traditional 10% or 20% deposit required by many lenders.

The mortgage, which enables buyers to put down just 2% of the house price, does not require a guarantor. However, it's important to note that the larger loan-to-value ratio means buyers will pay higher interest rates when they make repayments.

Another government scheme, the Help to Buy equity loan, offers a government loan of up to 20% (or 40% in London) after a 5% deposit. This scheme, too, is only available for new build properties.

Accord Mortgages is another lender accepting Universal Credit as a source of income for home affordability assessments, provided at least one other applicant receives an earned wage. Up to 60% of the Universal Credit amount will be considered, but housing allowance, service charges, or the child element for kids aged over 11 will be excluded.

The mortgage market is seeing a surge of similar offerings. For instance, the new "First Step" mortgage by Newcastle Building Society allows first-time buyers to purchase a home with just a £5,000 deposit. Skipton Building Society offers a 100% mortgage deal, and Nationwide's Helping Hand scheme allows customers to borrow six times their annual income.

April Mortgages has also recently launched a 100% mortgage deal, joining Nationwide in offering one of the very few mortgages that allow buyers to borrow at a high end of the loan-to-value spectrum, without needing a guarantor.

For those saving for a deposit, the Help to Buy Isa could be a valuable tool. This tax-free savings account offers a bonus of £50 for every £200 saved, up to a maximum limit of £3,000.

The Lifetime Isa is another government scheme that allows anyone aged 18 to 39 to save tax-free and receive a bonus of up to £32,000 towards their first home.

However, it's crucial for potential buyers to be aware of negative equity in case house prices fall, making it difficult or impossible to sell. This risk is particularly relevant for those taking advantage of high loan-to-value mortgages.

These new mortgage offerings have been hailed as an accessible way for buyers to get on the property ladder, providing more options for those seeking homeownership. As always, it's advisable for potential buyers to thoroughly research and understand the terms and conditions of any mortgage before making a decision.