Lloyds launches £5,000 minimum deal for Brits

Lending giant Lloyds is set to launch a new deal for Brits looking to move for the first time.

The new low-deposit mortgage could help first-time buyers get a foot on the property ladder with a deposit of just £5,000. The new product, which is also available through Halifax and via brokers, is aimed primarily at renters already managing substantial monthly housing costs, but who may lack financial backing from the "bank of mum and dad". Lloyds noted that the gap between typical rents and mortgage repayments has narrowed considerably, meaning many renters are already paying a comparable amount each month to what they would on a mortgage.

The bank stated that by reducing the upfront costs of getting onto the property ladder, the new mortgage could slash the time it takes to save a deposit by several years for some buyers.

The new mortgage is available for properties worth up to £300,000 and carries a maximum loan-to-value (LTV) of just over 98 per cent.

Applicants can borrow up to four-and-a-half times their salary with the five-year fixed-rate mortgage deal, which comes with no product fee, reports the Daily Record.

The mortgage product will carry an interest rate of 5.89 per cent when it officially launches on May 18. The deal is open to both employed and self-employed applicants, who will be required to pass "strict" affordability and credit checks, according to the bank.

The borrowing term extends to up to 40 years and the product will be offered UK-wide. Borrowers making purchases involving shared ownership schemes, new build homes and with gifted deposits are not eligible.

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. This gives people a better chance to own their first home and start building a more secure future."

Lloyds revealed that the typical first-time buyer is now aged 32 - two years older than a decade ago - as soaring rental costs and rising living expenses have made it increasingly difficult to save.

A number of other lenders also provide low or no-deposit mortgages, offering first-time buyers a vital foothold on the property ladder. In February, Santander UK unveiled a mortgage requiring a minimum deposit of £10,000, while Skipton Building Society similarly offers low to no-deposit mortgage options.

Andrew Montlake, chief executive of Coreco mortgage advisers, said: "This is a genuine shot in the arm for aspiring home buyers, especially those who don't have the luxury of the bank of mum and dad behind them.

"For many would-be buyers, the issue is not whether they can afford the monthly mortgage payments or whether they have a good credit record.

"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.

"There are already some decent low-deposit and even 100 per cent mortgage options out there, but when one of the UK's biggest lenders puts its weight behind this part of the market, it matters.

"It sends a message of confidence and gives more borrowers a realistic route onto the housing ladder."

David Hollingworth, associate director at LandC Mortgages, said: "This new launch is significant as it marks another major high street lender developing solutions for those with a small deposit.

"We've seen a growing range of lenders in this space, designing products that could significantly speed up the journey to home ownership.

"There are now several deals where it could be possible to borrow more than 98 per cent of the purchase price or even require no deposit at all.

"This will help those that have good affordability but are being held back by the need for the traditional deposit of 5 per cent or more."

Speaking generally, Mr Hollingworth warned that smaller deposits can result in a greater risk of purchasers falling into negative equity.

This occurs when house prices decline and the outstanding debt exceeds the property's value. However, he added: "That only becomes a problem where the property needs to be sold, which would crystallise a loss."