Newcastle Building Society Introduces New Low-Deposit Mortgage Excluding Gifted Deposits

Newcastle Building Society has rolled out a fresh mortgage option called the First Step mortgage, enabling homebuyers to put down just 2% of the property price with a minimum deposit of £5,000. However, individuals who have received financial assistance from family members, such as the Bank of Mum and Dad, are ineligible for this mortgage as gifted deposits are not permitted. The aim of the First Step mortgage is to cater to those who do not have familial financial support.

While the First Step mortgage does not allow gifted deposits, Newcastle Building Society still accepts them for other mortgage products. The property purchase price must fall within the range of £101,000 to £350,000 to be eligible for the First Step mortgage.

Repayments for the First Step mortgage are fixed at a 5.25% interest rate for the initial five years, and no guarantor is required. Low deposit mortgages offer the advantage of a quicker entry into the property market, reducing the time needed for saving up a substantial deposit. However, there is a risk of negative equity if property prices decline, potentially resulting in the property value falling below the outstanding loan amount.

Ben Smith, head of commercial and product development at Newcastle Building Society, emphasized the institution’s commitment to supporting first-time buyers from diverse backgrounds, including those with gifted deposits. Rachel Springall, a finance expert at Moneyfactscompare.co.uk, stressed the importance of lenders offering support to buyers with small deposits to sustain market momentum.

Additionally, the article highlights other housing schemes and mortgage options like Lifetime ISA, shared ownership, mortgage guarantee schemes, guarantor mortgages, and the First Homes scheme, each tailored to specific buyer needs and financial circumstances.