Newcastle Building Society has introduced a new mortgage option called the First Step mortgage, allowing homebuyers to secure a loan with a low 2% deposit requirement, starting from just £5,000. However, this particular mortgage is not available to individuals who have received financial assistance for their deposit from family members, as gifted deposits are not permitted. The aim of the First Step mortgage is to support individuals who lack familial financial support.
While the First Step mortgage does not accept gifted deposits, Newcastle Building Society still allows them for some of its other mortgage products. Properties eligible for the First Step mortgage must fall within the price range of £101,000 to £350,000.
This mortgage offers a fixed interest rate of 5.25% for five years without requiring a guarantor. Low deposit mortgages like the First Step mortgage provide a quicker entry onto the property ladder, reducing the time needed for saving. However, borrowers should be cautious about the potential risk of negative equity if property values decline, as well as the higher interest rates associated with low deposit mortgages, resulting in higher long-term repayments.
Ben Smith, the head of commercial and product development at Newcastle Building Society, emphasized the institution’s dedication to assisting first-time buyers from diverse backgrounds. Rachel Springall, a finance expert at Moneyfactscompare.co.uk, highlighted the importance of lenders supporting buyers with small deposits to maintain market activity.
Additionally, various other schemes and options are available to help individuals enter the property market, such as the Lifetime ISA, shared ownership, mortgage guarantee scheme, guarantor mortgages, and the First Homes scheme. These programs offer different benefits and eligibility criteria tailored to assist individuals in achieving their homeownership goals.