First-time buyers in the UK are being offered the opportunity to borrow up to 98% of the value of a property under a new mortgage scheme, but they will not be allowed to rely on financial help from parents for their deposit.
The First Step mortgage, launched by Newcastle Building Society, is designed specifically for those who have independently saved for their deposit and are looking to step onto the housing ladder.
According to property firm Savills, more than half (52%) of first-time buyers in 2023 relied on parental support to purchase their homes, highlighting the growing challenge for those trying to buy without family assistance.
The product comes with a five year fixed interest rate of 5.25% and is one of only a few mortgages currently offering loans above 95% of a property’s cost.
Borrowers can apply for mortgages ranging from £96,000 to £350,000, with a minimum deposit requirement of £5,000 or 2% of the purchase price, whichever is higher.
For properties priced above £250,000, this means a deposit greater than £5,000. Applicants will also need to declare the source of their deposit.
Newcastle Building Society explained the deal is part of a broader effort to make homeownership more accessible, particularly for young buyers struggling with rent and the rising cost of living.
The lender’s head of commercial and product development, Ben Smith said, “We’re committed to helping first-time buyers whatever their background. First Step has been created for those who have worked hard to save by themselves and are now ready to buy.”
Experts welcomed the scheme but noted its limitations. David Hollingworth of L&C Mortgages said the deal could prove invaluable for buyers who can afford repayments but struggle to save amid high rents, “It’s a great option for those finding it impossible to keep up with rising property prices while saving for a large deposit.”
He added that parents could still provide indirect assistance, for example by covering ancillary costs like legal or survey fees.
The wider mortgage market is also seeing greater availability of low-deposit products. Financial data firm Moneyfacts reports that deals at 90% and 95% loan-to-value (LTV) have reached a 17-year high.
Marsden Building Society, for example, offers a 95% mortgage with a five-year fixed rate of 4.69% plus a £998 arrangement fee, or 4.79% with no fee.
Meanwhile, Skipton Building Society has launched a 100% mortgage for renters with strong payment histories, requiring no deposit at all.
However, financial analysts warned of risks attached to such high LTV loans. Rachel Springall of Moneyfacts stressed that buyers need to be cautious: “Those borrowing at the higher end of the spectrum will have little equity in their homes. If house prices fall sharply, they could face serious financial difficulties. Seeking professional advice before committing is essential.”
The First Step mortgage highlights a growing shift among lenders to create options for buyers without family wealth. But with property prices still high, experts caution that affordability and financial resilience must remain at the forefront of any borrowing decision.
