Newcastle Building Society has introduced a new mortgage option with a low deposit requirement, allowing buyers to put down 2% of the property price, starting at just £5,000. This new First Step mortgage is aimed at individuals who have saved up their deposit independently and do not rely on financial assistance from family members.
While gifted deposits are not accepted for the First Step mortgage, Newcastle Building Society still allows them for some of its other mortgage products. Properties eligible for the First Step mortgage must fall within a price range of £101,000 to £350,000.
The mortgage comes with a fixed interest rate of 5.25% for five years and does not require a guarantor. Low deposit mortgages offer the advantage of helping buyers enter the property market more quickly without the need for extensive saving periods.
However, there are risks associated with low deposit mortgages, including the possibility of negative equity if property prices decline. Additionally, interest rates for low deposit mortgages are generally higher, resulting in increased long-term repayment amounts.
Ben Smith, head of commercial and product development at Newcastle Building Society, emphasized the commitment to supporting first-time buyers with various financial backgrounds through their mortgage offerings. Rachel Springall, a finance expert, highlighted the importance of lenders providing support for buyers with small deposits to keep the property market active.
Various other schemes are available to assist homebuyers, such as the Lifetime ISA for government bonuses, shared ownership options, the mortgage guarantee scheme, guarantor mortgages, and the First Homes scheme, each catering to different financial circumstances and preferences in the housing market.