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First-time buyers will be able to borrow up to 99% of a property's value under a new mortgage from Yorkshire Building Society (YBS).
The deal will allow buyers to get on to the property ladder with a fixed deposit of £5,000, potentially opening up home ownership to those struggling to save a big enough lump sum but with a high enough income to afford a mortgage.
Read on to find out about how the new deal will work and how its rate compares with the competition.
Find the right mortgage using the fee-free service provided by L&C Mortgages
Compare mortgagesYorkshire Building Society's new mortgage will allow first-time buyers to put up a minimum deposit of £5,000.
The fee-free mortgage is available on properties valued up to £500,000 in England, Scotland and Wales. New-build houses aren't eligible.
This deal is innovative in that it will theoretically enable people to buy a home with a deposit of as little as 1%.
YBS is launching the deal, but it will be administered by its intermediary-only brand, Accord Mortgages. This means applicants will need to speak to a mortgage broker to apply.
Usually, homebuyers need to put down a deposit of at least 5% of a property's value. Using the average first-time buyer price in England of £250,000, that would be £12,500.
However, under YBS's new deal, buyers would pay a £5,000 deposit, taking out a mortgage to cover the remaining £245,000. This means the mortgage would cover 98% of the value of the home.
At the extreme end of the scale, an applicant could theoretically put down £5,000 and take out a 99% mortgage on a property priced at £500,000.
YBS says this new mortgage will 'encourage a level playing field for those who don't have financial support from their families to fall back on'.
There's certainly some truth in this, as saving a big enough deposit is usually cited as one of the biggest barriers to home ownership.
The struggle to save tens of thousands of pounds means many buyers rely on the 'Bank of Mum and Dad' or options such as guarantor mortgages or shared ownership to get on to the ladder.
With most mortgages, a £5,000 deposit would only enable you to buy a home priced at £100,000 (95% loan-to-value), but with this mortgage you could theoretically buy one priced at £500,000.
It's too early to predict whether this new product will be a success, but there are a handful of potential issues to consider.
By requiring applicants to use a mortgage broker, YBS is taking affordability considerations into account and adding an extra layer of scrutiny to the application process.
It says that buyers will be subject to 'rigorous credit scoring and affordability checks' and will have to 'demonstrate strong creditworthiness'.
If you're in the market for a mortgage, there aren't many better providers out there.
Yorkshire Building Society is currently a Which? Recommended Provider for mortgages, having achieved a customer score of 75% in our survey and demonstrated that it regularly offers competitive deals.
YBS also achieved a perfect five-star rating for overall customer service.
This new deal is administered by Accord Mortgages, which is part of the YBS group.
Accord also fared well in our annual survey, achieving a customer score of 72%, placing it fourth out of 22 lenders we analysed.
Mortgage rates are considerably higher than they were a couple of years ago, meaning first-time buyers will need to carefully work out their projected repayments.
With the Bank of England likely to reduce its base rate later this year, we could see mortgages get a little cheaper as 2024 progresses, but significant cuts seem unlikely.
You can find out the latest market-leading deals in our guide to the best mortgage rates.
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