Newcastle Building Society has introduced a fresh low-deposit mortgage option that requires a minimum deposit of just £5,000, allowing buyers to put down 2% of the property price. However, individuals who have received gifted deposits, such as those from the Bank of Mum and Dad, are ineligible for this particular mortgage. The First Step mortgage aims to assist individuals who do not have financial support from their families. While gifted deposits are not accepted for this mortgage, Newcastle Building Society still permits them for other mortgage products. The property price for the First Step mortgage must fall within the range of £101,000 to £350,000.
The interest rate for the First Step mortgage is fixed at 5.25% for five years, and no guarantor is required. Low deposit mortgages offer the advantage of a quicker entry into the property market, reducing the time needed for saving. Nonetheless, the main risk associated with such mortgages is the possibility of negative equity if property prices decline, leading to a situation where the property value is below the outstanding loan amount.
Ben Smith, head of commercial and product development at Newcastle Building Society, emphasized their commitment to supporting first-time buyers, including those with small deposits. Rachel Springall, a finance expert at Moneyfactscompare.co.uk, highlighted the importance of lenders offering support to buyers with limited deposits to maintain market activity.
In addition to the First Step mortgage, various other schemes exist to assist homebuyers, such as the Lifetime ISA, shared ownership, mortgage guarantee scheme, guarantor mortgages, and the First Homes scheme, each tailored to different financial circumstances and needs.