Lloyds Banking Group (LBG) is set to launch a 98% loan-to-value (LTV) first-time buyer mortgage with a minimum deposit requirement of £5,000.
With a maximum purchase price of £300,000 and borrowing capped at £295,000 based on a loan-to-income (LTI) ratio of 4.5 times earnings, from 18 May, first-time buyers can access a rate of 5.89% fixed for five years.
Self-employed borrowers are eligible for the deal, but buyers of shared ownership or new-build properties are not accepted. Gifted deposits are also banned.
Borrowers’ credit ratings must be high and at least one applicant must be a first-time buyer. The mortgage is available across LBG’s brands through direct and intermediary channels.
Big banks break 95% LTV barrier
The average first-time buyer household not receiving help with a deposit had an income of £65,351 and bought a home worth £279,381, according to figures from UK Finance.
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Based on a minimum 5% deposit, the average household would therefore need to save £14,000. LBG’s deal would allow eligible borrowers to put down £9,000 less to secure the same home.
LBG is the second of the big six UK mortgage lenders to break through the 95% lending barrier. Earlier this year, Santander launched its 98% LTV mortgage for first-time buyers with a minimum deposit requirement of £10,000, based on a maximum purchase price of £500,000.
Amanda Bryden (pictured), head of Halifax Intermediaries and Scottish Widows Bank, said: “We recognise our responsibilities as a lender to ensure loans are affordable – not just now, but in the future for all our borrowers. With this new offer, brokers have a new option for buyers who have shown their ability to manage their finances, save for a deposit themselves and who are taking the greater certainty of a longer-term fixed rate.
“A lower deposit can make it easier to save for a deposit for many, or it can help free up cash for other costs, like conveyancing or setting up your new home the way you want it.”
