A lender has launched a new mortgage for first-time buyers with a minimum deposit of just £5,000, on the condition they don’t use funds from the “bank of mum and dad”.
Newcastle Building Society said its First Step mortgage will let buyers borrow up to 98% of a home’s value with a minimum deposit of just £5,000. The mortgage allows borrowing of £96,000 to £350,000 and has a five-year fixed mortgage rate.
However, the lender said that one condition of the mortgage was that the money for the deposit could not be gifted.
According to a report by The Times, Newcastle Building Society head of commercial and product development Ben Smith, said: “First-time buyers continue to face real challenges with rising house prices, higher rental costs and the cost of living. It’s especially difficult for those who don’t have access to the bank of mum and dad.”
“That’s why we’ve launched this mortgage to give more options to those who have worked hard to save and have built a deposit by themselves.”
Read more: Lenders raise mortgage rates ahead of interest rate decision
As house prices continue to rise, more hopeful first-time buyers have been forced to rely on help from family to get on the property ladder. The average price of a UK home hit a record high of £299,331 in August, according to figures released by lender Halifax last week.
Some 173,500 (52%) of first-time buyers got help from the “bank of mum and dad” last year, receiving an average £55,572, according to research published by estate agents Savills in May.
At the same time, separate research released on Monday found that rising financial pressures are prompting a growing number of UK retirees to reduce the financial support they provide to younger generations.
The report by wealth manager and financial adviser Quilter found that 13% of retirees plan to cut back on gifting to children and grandchildren.
Quilter’s report, which was based on a survey of 5,001 retirees, showed the average retiree currently spends over £2,500 annually supporting younger family members – £1,323 in gifts and £1,175 towards education.
Earlier this week, we asked Yahoo Finance UK readers if they believed that the bank of mum and dad was essential to getting on the property ladder. We received 1,108 votes, with 65% of respondents believing that it was necessary, while 25% disagreed and 10% were undecided on the matter.
Read more:
Download the Yahoo Finance app, available for Apple and Android.