Lending giant Lloyds is launching a new low-deposit mortgage that could help first-time buyers get on the property ladder with a deposit as low as £5,000.
The new product, which is also available through Halifax and via brokers, is aimed primarily at renters who are already coping with significant regular housing costs, but who may not have financial support from the “bank of mum and dad”.
Lloyds said the gap between typical rents and mortgage payments has narrowed, meaning many renters are already paying as much each month as they would on a mortgage.
The bank said that by lowering the upfront cost to get on the property ladder, the new mortgage could reduce the time it takes to save a deposit by years for some buyers.
The new mortgage is available for homes worth up to £300,000 and has a maximum loan-to-value (LTV) of just over 98%.
People can borrow up to four-and-a-half times their salary with the five-year fixed-rate mortgage deal, which has no product fee.
The mortgage product will have an interest rate of 5.89% when it officially launches on May 18.
The deal is available to both employed and self-employed applicants, who will need to pass “strict” affordability and credit checks, according to the bank.
The borrowing term is up to 40 years and the product will be offered UK-wide.
Borrowers making purchases involving shared ownership schemes, new build homes and with gifted deposits are not eligible.
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Amanda Bryden, head of mortgages at Lloyds, said: “We hear time and again from those who are doing everything right – paying their bills, managing their money well, putting aside what they can – but still feel locked out of home ownership because saving a big enough deposit seems impossible.
“The reality is that many would-be buyers are already paying as much in rent as they would on a mortgage.
“By cutting the upfront cost to £5,000 we’re breaking down a major barrier to getting on the property ladder. This gives people a better chance to own their first home and start building a more secure future.”
Lloyds said the average first-time buyer is aged 32 – two years older than a decade ago – as the increasing cost of rents and rises in living costs have made it harder to save.
Several other lenders offer low or no-deposit mortgages, helping to give first-time buyers a step onto the property ladder.
In February, Santander UK launched a mortgage which requires a minimum deposit of £10,000.
Skipton Building Society also offers mortgages with low to no deposit options.
