Lloyds Bank is launching a new low-deposit mortgage allowing first-time buyers to get on the property ladder with as little as £5,000 upfront, in a move designed to help renters frozen out by soaring housing costs.
The product, which will also be available through Halifax and mortgage brokers, is aimed at buyers who can afford monthly repayments but struggle to save large deposits without help from the so-called “bank of mum and dad”.
Under the scheme, buyers can purchase homes worth up to £300,000 with a loan-to-value ratio of just over 98pc, meaning only a tiny deposit is required.
The five-year fixed-rate mortgage, launching on May 18, carries an interest rate of 5.89pc and comes with no product fee.
Borrowers can take out loans of up to 4.5 times their salary, with repayment terms of up to 40 years.
The bank said the initiative reflected the growing reality that many renters are already paying as much each month in rent as they would on mortgage repayments.
By slashing the upfront savings hurdle, Lloyds said it hoped to cut years off the time many aspiring homeowners spend trying to build a deposit.
Lloyds Banking Group said the average age of a first-time buyer has now risen to 32 — two years older than a decade ago — as rents and living costs continue to squeeze household finances.
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.”
The mortgage will be available to employed and self-employed applicants across the UK, although buyers using shared ownership schemes, purchasing new-build homes or relying on gifted deposits will not qualify.
Applicants will also face what the bank described as “strict” affordability and credit checks.
The move follows a growing trend among lenders offering ultra-low-deposit products as affordability pressures intensify.
Earlier this year, Santander UK launched a mortgage requiring a minimum £10,000 deposit, while Skipton Building Society has also introduced low and no-deposit options.
Mortgage brokers said Lloyds’ entry into the market could significantly widen access for buyers struggling to save.
Andrew Montlake, chief executive of Coreco mortgage advisers, described the product as “a genuine shot in the arm for aspiring home buyers”.
“For many would-be buyers, the issue is not whether they can afford the monthly mortgage payments,” he said.
“The real mountain to climb is saving a big enough deposit while rents, bills and everyday living costs continue to take a hefty bite out of their income.”
David Hollingworth, associate director at L&C Mortgages, said the launch was significant because it showed another major high street lender backing small-deposit lending.
However, he warned that buyers borrowing at such high loan-to-value levels could face greater risks if house prices fall.
Negative equity occurs when the amount owed on a mortgage exceeds the property’s value, though Mr Hollingworth noted this generally only becomes a serious issue if the home must be sold.
Leave a Comment