A game changer? Yorkshire Building Society launches 99% loan-to-value mortgage for first-time buyers

The plan for 100% loan-to-value mortgages, which was suggested by the Government, has been abandoned. Nevertheless, Yorkshire Building Society has devised its own project to assist people buying their first home.

The financial institution has introduced a mortgage scheme that requires only a £5000 down payment and is specifically designed for individuals purchasing their first property.

This scheme is applicable for houses with a value of up to £500,000, which means it offers a loan with a 99% Loan-to-Value ratio.

There are certain limitations to this rule as it cannot be applied to apartments or newly constructed buildings, which are commonly sought after by individuals buying a property for the first time.

Furthermore, opting for a 5-year fixed interest rate of 5.99% could prove to be costly for certain borrowers.

The new change has received a positive response, however, some analysts have pointed out potential hazards, including the danger of having a negative equity.

Mark Harris, who holds the position of top boss at SPF Private Clients, expressed his thoughts on the matter of mortgages. He stated that currently, there are only options for customers to obtain five-year products. Nonetheless, he hoped that within that timeframe, the value of the real estate will rise.

The loan does not provide the choice of paying interest only, hence, the borrowers will have to pay back a portion of the borrowed amount along with interest paid monthly which improves their ownership in the property.

If the purchaser becomes unemployed and unable to make mortgage payments, there may be doubters, but the same is accurate for lessees. Returning to one's parents' home is not feasible for everyone.

Matt Smith, who is knowledgeable in the field of mortgages for Rightmove, stated that it's a positive sign to witness lenders persisting in their efforts to develop new ideas for the mortgage industry. This is especially noteworthy after the government relinquished its plans to promote more affordable deposit mortgages during the Spring Budget.

This fresh item could be useful for new buyers who meet the financial qualifications but find it challenging to gather a more substantial down payment. What could truly make a difference for first-time buyers is a novel idea or modifications in the regulations that would aid in overcoming the obstacle of raising the deposit and obtaining enough funds from a financial institution. Lenders who are making an effort to assist more potential first-time buyers in purchasing a house should be encouraged.