Yorkshire Building Society launches new mortgage deal with £5,000 deposit but homebuyers urged to ‘overpay’

Yorkshire Building Society launches new mortgage deal with £5,000 deposit but homebuyers urged to ‘overpay’

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Patrick O'Donnell

By Patrick O'Donnell

Published: 27/03/2024

- 00:01

Updated: 27/03/2024

- 08:55

Banks and building societies, including Yorkshire Building Society, are offering new mortgage products to assist new homebuyers get on the property ladder

Yorkshire Building Society has announced the launch of a new £5,000 deposit mortgage deal for first-time homebuyers.

However, experts are warning anyone to take advantage of this offering to “overpay” to reduce their long-term mortgage liability.

According to the financial institution, this offering will enable prospective homebuyers to potentially borrow up to 99 per cent of the property value.

This new fee-free deal will enable first-time buyers across England, Scotland and Wales to put down a £5,000 deposit and borrow up to 99 per cent of a property value.

Someone buying a typical first-time buyer property at £200,000 would only have to pay 2.5 per cent of the purchase price upfront.

Under Yorkshire Building Society’s £5,000 deposit deal, the remaining 97.5 per cent would be borrowed as a mortgage.

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Yorkshire Building Society branch

The building society is offering a new mortgage deal to first-time buyers


This mortgage is available directly to customers and via brokers through Accord Mortgages, which is the lender’s intermediary-only arm.

Ben Merrit, Yorkshire’s director of mortgages, cited research by the building society which found that £5,000 is the amount that could shorten the time needed for first-time buyers to become mortgage-ready.

Merrit said it would encourage a “level playing field for those who don’t have financial support from their families to fall back on”.

The deal, which is only available for first-time buyers, could allow borrowers with a deposit of this amount to take out a five-year fixed-rate mortgage at an interest rate of 5.99 per cent.

As part of this product, the maximum borrower age at the end of the mortgage is 70. Furthermore, it is not available for new-build properties or flats.

On top of this, the building society confirmed that all loans are subject to rigorous credit scoring and affordability checks.

“We have a duty to encourage financial responsibility in anyone taking out a mortgage,” Merrit added.

“While £5,000 represents a one per cent 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.

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

Previous research from Yorkshire Building Society suggests around two in five first-time buyers receive financial help from loved ones to have the chance of stepping onto the housing ladder.


Woman looking at financial statement and mortgage billsMortgage fees are rising in a blow to homebuyers GETTY

Rachel Springall, a finance expert at Moneyfactscompare.co.uk, noted the deal will “no doubt be popular” among those trying to get on the property ladder.

She explained: 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.”

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