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Latest First Time Buyer Mortgage News

Annie 31st Mar 2024 No Comments

Reading Time: 5 minutes

First time buyers have had a struggle in recent years, as deposits get larger, house prices rise, and mortgages were harder to get. The good news is that there are some new first time buyer mortgage options available that could mean 2024 is the year you finally get the keys to your own house. Here’s what you need to know.

What is a First Time Buyer Mortgage?

Just £5,000 Deposit for a £500k Property

Other First Time Buyer Mortgage Options

The Risk of Large Loan to Value Mortgages

Are LISAs Useful?


What Is a First Time Buyer Mortgage?

If you have never owned property before, you could be eligible for a first time buyer (FTB) mortgage. There are, however, lots of restrictions and they vary between mortgage providers and even mortgages within the same provider. The key thing is you must never have owned property before.

If you’re buying with a partner, friend, or family member who has previously owned property, all is not lost. You can buy a property as a first time buyer with someone who is not one, and still make the most of great first time buyer deals.

Is £5,000 for £500k Mortgage Too Good to Be True?

Yorkshire Building Society recently launched an incredible first time buyer mortgage offer, requiring buyers to have just £5,000 for a deposit on properties up to £500,000. Is is too good to be true?

The deal is real, but there are several restrictions you need to be aware of before applying. The maximum loan to value is a huge 99% – which means if you have £5,000 saved up you could get a mortgage up to £495,000. The lending criteria is strict and you’ll need to have an excellent credit score to boost your chances of acceptance.

The first five years, the loan rate is fixed at 5.99%, and then becomes variable. Fixing is common in mortgage deals, but it is worth noting that if you want to shop around for a better mortgage rate after those five years, such a high loan to value mortgage could make it harder to get a good rate later on. If, however, you have a lower loan to value (such as a £5,000 deposit on a £250,000 house), this is less of an issue – it’s just if you’re right up there with the maximum £500,000 house price.

The bad news is this mortgage can’t be used on flats or new build houses. This means you’ll be restricted to buying a house that might need some work doing to it as it’s older – so make sure you factor that in to your calculations. The usual mortgage lending criteria will apply, so things like non-standard construction and unliveable houses (i.e., ones that need a total renovation to be habitable) won’t qualify either. The mortgage is available in England, Scotland, and Wales but not Northern Ireland.

Other First Time Buyer Mortgage Deals

Of course, Yorkshire Building Society is just one option available on the market for first time buyer mortgages right now. If you don’t meet the eligibility criteria, or want to buy a flat or new build home, another option might suit your circumstances better.

Halifax offer a similar 5% deposit scheme for first time buyers, which does allow new builds but not new build flats. You also cannot take advantage of other buying schemes such as Shared Ownership, Right to Buy, Shared Equity, or Buy to Let. It’s a repayment mortgage (not interest-only), and you can borrow up to £570,000 with a deposit between 5% – 10% under the Government mortgage guarantee scheme. This scheme is set to end on 30th June 2025, so you will need to apply before then.

What’s interesting about Halifax is that they also offer a ‘Family Boost‘ scheme which could be useful for those who have parents or grandparents with savings they are willing to hold in trust for three years. Ten per cent of the purchase price of the house is held in an account for three years, and if you keep up with your savings then your family receive their money – with interest – back.

Natwest offer a 95% LTV first time buyer mortgage scheme as well, with a purchase price up to £600,000. Once again, it can’t be used on a new build home. The big restriction on this one is that you must borrow between 91% – 99% of the purchase price, whereas other schemes allow a lower LTV option if you have a bigger deposit and lower purchase price. Natwest’s 95% LTV mortgage, however, is open to those who are not classed as first time buyers – so anybody can apply for it (although you must be a home mover – you can’t use it to purchase a Buy to Let property).

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The Risk of Large Loan to Value Mortgages

The Government Mortgage Guarantee Scheme is designed to help first time buyers get on the property ladder. It is currently due to end on 30th June 2025, but could end sooner. The idea is to help new buyers find properties in their desired area without needing a huge deposit. In theory, this should help more people become homeowners.

However, a high loan to value mortgage does put people at risk of tying themselves into both a property and a high mortgage rate for a very long time. Most mortgages are a minimum of 25 years, and the fixed term rate is for two, three, or five years depending on the provider and mortgage offer. This means that, after that fixed term, buyers will be at risk of high variable rates which could cost a lot more than the initial monthly payments. It will also be harder to shop around to remortgage after the fixed term, as lenders will be taking on a large risk of giving property owners a mortgage with little equity in their home.

With higher variable rates, long mortgage terms, and often high early repayment fees, any first time buyer considering a 5% deposit mortgage should take time to consider their long-term plans. If you want to move house again in, say, five years’ time, it might be better to save a larger deposit for another year or two and find a standard mortgage with a lower loan to value percentage instead of buying twice in a short space of time.

Are Lifetime ISAs Useful?

It’s all gone a bit quiet on Lifetime ISAs, so we thought it was worth mentioning here that, if you already have one and made your first payment into it 12 months before you apply for a 5% mortgage, you can benefit from the high LTV scheme. This means that, in theory, you only need to save £4,000 in one year to get the £1,000 bonus and you’ll have your £5,000 deposit already saved.

However, it is always worth checking that the property you are interested in buying can be used with both a Lifetime ISA and is eligible for the 95% mortgage scheme you’re applying for, as there might be some restrictions that cancel each other out. (For example, if you hold an older Help to Buy ISA you might only be able to buy a new build home, which then means you can’t get a 95% mortgage under the Government scheme).

Not sure a first time buyer mortgage is for you? There are lots of other ways to buy a house – check out the rest of our mortgages and property section for ideas.


Disclaimer: MoneyMagpie is not a financial advisor or mortgage broker. Information provided in this article should not be taken as financial advice and individuals are recommended to seek expert independent financial advice before applying for a mortgage or any other financial product.

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Jasmine Birtles

Your money-making expert. Financial journalist, TV and radio personality.

Jasmine Birtles

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