The 99% mortgage is here, as Yorkshire Building Society and Accord have launched a new mortgage product available for first-time buyers with just a £5,000 deposit available up to £500,000.
Newspage asked brokers for their views, finding that many were positive, but others were sceptical.
One broker said: “It’s a game-changer for many dreaming of homeownership but stuck in the savings slow lane.”
Another added that this would be “an incredible opportunity for first-time buyers.”
However, a third had doubts, saying: ”Trying to address ‘affordability’ issues with demand-side solutions like this is akin to coming up with a 80-year payment plan for someone on minimum wage to buy a Ferrari.
“Negative equity devastated lives in the early 90s.
“This new product from Yorkshire and Accord is asking for trouble.”
Further reaction:
Craig Fish, director at Lodestone Mortgages & Protection:
“Kudos to Yorkshire Building Society. The bunny is out the hat just in time for Easter with this innovative product aimed at those who need it the most.
“First-time buyers are those who stimulate movement further up the property ladder, so this product should solve the chicken and egg situation that the UK property market currently faces.
“It’s helping those who need it the most to get on the property ladder, and subsequently allowing those already on the ladder to move further up it.
“There are other options available for first-time buyers and of course there are caveats like make sure you overpay to avoid negative equity, but overall this is a good addition to the first-time buyer toolbox.”
Graham Cox, director at SEMH Self-Employed Mortgages:
“Trying to address ‘affordability’ issues with demand-side solutions like this is akin to coming up with a 80-year payment plan for someone on minimum wage to buy a Ferrari.
“Potentially, a borrower could put down just 1% deposit.
“What happens if they lose their job and the value of the property falls 5%?
“Negative equity devastated lives in the early 90s.
“This new product from Yorkshire and Accord is asking for trouble.”
Akhil Mair, director at Our Mortgage Broker:
“While it’s heartening to see efforts to make homeownership more accessible with a lower deposit requirement, the 5.99% fixed rate and high loan-to-value ratio do raise some valid concerns.
“With house prices being as unpredictable as ever, there’s a legitimate worry about the potential for negative equity down the line.
“Additionally, the question arises: will other banks be willing to refinance such high loan-to-value mortgages after the fixed period ends?
“It’s a delicate balance between innovation and risk, and one that warrants careful consideration.
“Nonetheless, any initiative aimed at helping first-time buyers achieve their homeownership dreams is a step in the right direction.
“Let’s hope for the best and keep a watchful eye on how this unfolds.”
Peter Stamford, mortgage expert at Stamford Home Finance:
“Finally, some innovation. This is a bold move from Accord and Yorkshire.
“The rate is high at 5.99% fixed for 5-years, the affordability will no doubt be tough, but as a way of getting on that first rung of the housing ladder this looks to be an incredible opportunity for first-time buyers.
“I have a feeling these are going to be snapped up. Act quickly.”
Dariusz Karpowicz, director at Albion Financial Advice:
“Accord’s launch of a 99% mortgage for first-time buyers is like a breath of fresh air.
“With just a £5,000 deposit, it’s a game-changer for many dreaming of homeownership but stuck in the savings slow lane.
“Sure, it’s a bold move amidst the cost of living squeeze, and while it won’t solve every problem — affordability still looms large with wages lagging behind inflation — it’s a step towards making the property ladder less of a leap.
“Here’s hoping this sparks a trend, encouraging more lenders to craft solutions that really help first-time buyers. It’s about time the path to owning a home became a bit smoother.”
Michelle Lawson, director at Lawson Financial:
“This is a great bit of much needed innovation.
“That’s if it works and isn’t a ‘token gesture’ offering.
“Tight criteria can often mean that just a small handful of borrowers will qualify.
“Affordability still can play a big part of the problem in London and the South East.”
Andrew Montlake, managing director at Coreco:
“It’s refreshing to see a lender take the bull by the horns and release an innovative scheme to help first-time buyers.
“We speak to many potential buyers who in theory could afford a mortgage, but struggle to save the high deposits needed, especially when faced with rental costs that are often more than the monthly mortgage costs would be.
“Property ownership is fast becoming the preserve of those lucky enough to have additional family funding, whilst those who do not, remain trapped in an ever more competitive private rental sector.
“Owning your own home remains the dream for many, and offering a mortgage with a deposit of £5,000 will open the doors to more buyers who had been starting to give up hope of owning soon.
“Whilst this alone will not solve the issues around home ownership, and some borrowers may not qualify given the fact that prudent lending and affordability rules are still rightly front and centre of this scheme, it is nevertheless a start from a forward-thinking lender.”
Justin Moy, managing director at EHF Mortgages:
“Firstly we should applaud some innovation with a product that helps those struggling to raise their deposit.
“Is it suitable for the first-time buyer market? It’s certainly an option within the wider low deposit options, we still have some 100% schemes for renters and those with family assistance, so this isn’t going to revolutionise the market on its own, but it will help a number of borrowers who are currently stuck and might pay less than their rental.”
Stephen Perkins, managing director at Yellow Brick Mortgages:
“This innovative new product may not be the final piece in the property puzzle but it is a large step in completing the border.
“Technically it is only a 1% deposit for first-time buyers able to buy at 500k and afford a £495,000 mortgage with tough affordability checks, but in reality it will be more likely used at an around 2.5% deposit mortgage on homes around £200,000.”
Riz Malik, director at R3 Mortgages:
“A great headline-grabber and we welcome new products with open arms, especially for first-time buyers who have been neglected by the Government.
“However, the product does have several conditions so it will be interesting to see how many people get over the finish line.”
Katy Eatenton, mortgage and protection specialist at Lifetime Wealth Management:
“It’s so refreshing to see lenders trying to help first-time buyers.
“It will be fascinating to see how high the internal credit scoring is and how many cases get over the line.
“However, I definitely have enquiries from people that I may be able to help with this product.”
Gary Bush, financial adviser at MortgageShop.com:
“Yorkshire Building Society, and its financial adviser-only subsidiary Accord Mortgages, has become the first-time buyer’s champion by launching an amazing 99% mortgage.
“This new product breathes some much needed fresh air into the market to assist struggling home purchasers.
“A round of applause for the innovation displayed here by this Northern lender that has national reach.”
Matthew Jackson, director at Mint FS:
“A great headline and a great first step to support first-time buyers and something that was much needed following a Budget that did little to promote homeownership.
“Any innovation in this space is a good thing, and when this can be used with Accord’s standard criteria of longer terms, income boosts and cascade score they will truly have a golden egg.”
Hannah Bashford, director at Model Financial Solutions:
“First-time buyers have been given a boost with this innovative product.
“The Government couldn’t make it work so a lender has gone out and set their stall on a 99% mortgage product.
“Well done Accord for the innovation but let’s see how many get over the line with strict criteria and conditions. As always the devil is in the detail.”
Rohit Kohli, director at The Mortgage Stop:
“Well done to Accord for addressing one of the biggest challenges facing first-time buyers by introducing a mortgage that slashes the amount of deposit needed to get into the property ladder.
“Of course the devil will be in the detail as to who can qualify for this but initially the set of requirements laid out by Accord and Yorkshire does seem restrictive but that’s understandable as they launch this product and hopefully the criteria will loosen in time.
“With Perenna offering long-term fixes on up to six times income and 100% mortgage deals for renters there does seem to be more choice now for first-time buyers.”
Ross Lacey, director and chartered financial planner at Fairview Financial Management:
“This looks like something that will be perfect those who meet the affordability requirements to borrow, but struggle to save a bigger deposit.
“We’ll certainly be considering this product in the right circumstances.
“These people tend to be higher-earners, who are currently renting and in many cases can find that the mortgage payments won’t be much different, and perhaps even a bit less, than the rent they currently pay.
“However, the fact that it won’t be available for flats will certainly impact the take-up.”
Elliott Culley, director at Switch Mortgage Finance:
“An innovative product released by Yorkshire Building Society and Accord that will help out some first-time buyers no doubt. Is it really a 1% deposit mortgage?
“Only if you are buying at £500,000, because the minimum deposit is £5000.
“The proof will be in the pudding when the first few borrowers look to apply for this type of product.
“How strong will their credit profile need to be and will this be affordable for the type of borrower that will need this product?
“It will be interesting to see if this product proves popular.”
Ben Perks, managing director at Orchard Financial Advisers:
“I’m all for product innovation. It’s something that brokers have been calling for throughout this difficult period.
“A 99% mortgage does make me nervous though.
“This product will be very niche and suitable for a very select minority of first-time buyers that can afford £500,000 plus properties.”
