Lloyds, one of the UK’s leading lending institutions, is introducing a new low-deposit mortgage aimed at significantly easing the path to homeownership for first-time buyers, requiring a deposit of just £5,000.
Available through Lloyds, Halifax, and independent brokers, the product is specifically tailored for renters who often manage substantial monthly housing costs but lack financial assistance from the “bank of mum and dad”.
The bank highlighted that the financial disparity between typical rental payments and mortgage instalments has diminished, suggesting many renters are already paying amounts comparable to what they would on a mortgage.
By substantially reducing the initial upfront cost, Lloyds anticipates this new offering could cut years off the time some buyers spend saving for a deposit.
The mortgage is applicable for properties valued up to £300,000 and boasts a maximum loan-to-value (LTV) of just over 98 per cent.
People can borrow up to four-and-a-half times their salary with the five-year fixed-rate mortgage deal, which has no product fee.
The mortgage product will have an interest rate of 5.89 per cent when it officially launches on May 18.
The deal is available to both employed and self-employed applicants, who will need to pass “strict” affordability and credit checks, according to the bank.
The borrowing term is up to 40 years and the product will be offered UK-wide.
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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 said the average first-time buyer is aged 32 – two years older than a decade ago – as the increasing cost of rents and rises in living costs have made it harder to save.
Several other lenders offer low or no-deposit mortgages, helping to give first-time buyers a step onto the property ladder.
In February, Santander UK launched a mortgage which requires a minimum deposit of £10,000.
Skipton Building Society also offers mortgages with low to no deposit options.