Making a comeback: 95 per cent loans

New schemes have been launched by lenders to help first-time buyers raise a deposit. Our money expert points to the best mortgages for people wanting their first home
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Is the gloom lifting? Lenders have recently launched a range of products aimed at first-time buyers - there are schemes to help them raise a deposit and the 95 per cent loan is making a comeback.

“Lenders realise that an active first- time buyer market is essential if there is to be a revival in the UK housing market,” says Andrew Hagger, of comparison site Moneynet. “But the fact that a five per cent deposit is once again considered acceptable doesn’t mean it will be easy to get such a mortgage.”

Potential buyers will almost certainly need perfect credit ratings, plus be able to tick every box on a lenders’ wish list. The rates available for a 95 per cent loan-to-value mortgage are 5.99 per cent from Skipton Building Society, 6.29 per cent from Nationwide and 6.99 per cent from Clydesdale Bank.

Those are clearly much higher than for smaller mortgages, but may be preferable to renting. Hagger points out: “For many, the affordability of repayments wasn’t the issue, it was the daunting prospect of trying to scrape together a 15 per cent-plus deposit.”

A £120,000 mortgage at 5.99 per cent over 25 years would involve monthly repayments of £772.43. At 6.99 per cent the monthly cost would be £847.37.

Another interesting banking initiative are new products aimed to help first time buyers build up their savings. Nationwide Building Society’s new "save to buy" scheme offers first purchasers who save £2,500 to £5000 towards a home a cashback incentive of £250. That’s doubled to £500 for building savings up to £10,000, whilst anyone managing more than that receives a £1000 rebate off their mortgage.

Yorkshire Bank recently launched a new Regular Home Saver account, where first-time buyers who save up a five per cent deposit and then go on to take out a mortgage with the bank receive a £500 bonus. Those managing to squirrel away a 10 per cent stake receive £1,000.

Santander is also offering a preferential deal to its First Home Saver customers. Homeowners between 16 and 35 are eligible. amd those who pay £100-300 into their account each month receive five per cent interest on their savings - and are then eligible for a competitive mortgage rate of 5.29 per cent, with a £495 fee, free basic valuation and £250 cashback.

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