Yorkshire Building Society has stolen a march on other lenders by offering a new 5% deposit mortgage for first time buyers via its subsidiary, Accord. This is ahead of the Government’s 5% mortgage guarantee. The interest rate isn’t as appealing as I was hoping these new products were going to be, at 3.99% with a £995 upfront fee and a free valuation. Although, it’s probably not a poor offering for those with limited savings, as these loans are not back by the Government.

My interpretation of this ‘pre-emptive’ strike by YBS is that all the lenders are keen to offer low-deposit loans. They will all want to ‘draw in’ new customers, especially first time buyers, but the majority of the lenders will be wary of the tight criteria set out by the banking codes. As soon as the Government’s guarantee is available to lenders I suspect we’ll see dozens of these new low-deposit products hit the market.

A couple of years ago there were around 400 products which only required a 5% deposit. According to Moneyfacts, there were only 5 products in the market with a 5% deposit at the start of this month – none of which were at attractive rates or terms.

During the pandemic many younger people have had little to spend their money on, and savings have been accumulating at an unprecedented rate. Many aspiring home owners will now have savings sufficient for a 5% deposit mortgage. I anticipate this will lead to a sudden surge in demand for property once these new mortgage products become available.

With a further surge in demand for property, yet a limited/relatively fixed supply, property prices are set to continue their upward trajectory for the next year or two!

– By Director Michael Moore