Newcastle Building Society Introduces New Mortgage for First-Time Buyers
Newcastle Building Society has unveiled a new low-deposit mortgage option, called the First Step mortgage, tailored for aspiring homeowners. This mortgage allows buyers to contribute just 2% of the property price as a deposit, with a minimum requirement of £5,000.
One of the unique features of the First Step mortgage is that applicants cannot use gifted deposits from family members. The aim of this mortgage is to assist individuals who lack financial support from their families in purchasing a home. While gifted deposits are not permitted for this particular mortgage, Newcastle Building Society still accepts them for other mortgage products. Properties eligible for the First Step mortgage must fall within the price range of £101,000 to £350,000.
The fixed interest rate for the First Step mortgage is set at 5.25% for the initial five years, and no guarantor is necessary. Low deposit mortgages offer the advantage of enabling buyers to enter the property market sooner without the need for extensive savings. However, there is a risk of negative equity if property values decline, and interest rates on low deposit mortgages are typically higher, resulting in increased long-term repayment amounts.
Ben Smith, Head of Commercial and Product Development at Newcastle Building Society, emphasized the institution’s commitment to supporting first-time buyers from various backgrounds. The society’s mortgage offerings cater to a wide range of individuals, including those with gifted deposits. Rachel Springall, a finance expert at Moneyfactscompare.co.uk, highlighted the importance of lenders providing options for buyers with small deposits to sustain market activity.
Other home buying options in the market include the Lifetime ISA, shared ownership schemes, mortgage guarantee schemes, guarantor mortgages, and the First Homes scheme, each with its unique features and eligibility criteria.
Overall, the introduction of the First Step mortgage by Newcastle Building Society aims to assist individuals who have diligently saved for a deposit independently and are eager to take the step onto the property ladder.