A new mortgage only requires first-time buyers to pay a 1% deposit - the small print explained

Tipton is asking for 20 per cent of the property price as security to get the deal (Photo: Shutterstock)Tipton is asking for 20 per cent of the property price as security to get the deal (Photo: Shutterstock)
Tipton is asking for 20 per cent of the property price as security to get the deal (Photo: Shutterstock)

First-time buyers looking to get onto the property ladder could bag themselves a deal with the launch of a new 99 per cent mortgage scheme.

Tipton Building Society has begun to offer customers the option to put down a one per cent deposit, with the bank providing a loan to cover the rest.

How does it work?

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The new mortgage is marketed as 99 per cent loan-to-value (LTV), meaning buyers only need to put down a one per cent deposit.

However, Tipton is asking for 20 per cent of the property price as security to get the deal. This means that parents or relatives will need to act as guarantors for the loan.

First-time buyers need to provide a deposit between one and 10 per cent, while the remaining amount needs to be guaranteed by family members.

This can be done by putting funds into the bank’s Family Assist savings account, or by securing the money against their own property, providing they own at least 40 per cent of their home.

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The mortgage can run between five and 35 years, and the 3.09 per cent interest rate is fixed for five years until 30 November 2025. After this point, it will revert to Tipton’s standard variable rate, which is currently 4.94 per cent.

Buyers will pay early repayment fees of one per cent for each year remaining on the mortgage, if you overpay more than 10 per cent each year. Over payments of up to 10 per cent will not incur a fee.

Additionally, you cannot take the mortgage with you if you move house, and there will be a charge of £125 if you cancel early.

‘Generation Buy’ scheme

The cheap deal comes just after Boris Johnson announced a new five per cent mortgage scheme, aimed at benefiting first-time buyers.

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The scheme is intended to help fix the UK’s “broken housing market” and turn “Generation Rent” into “Generation Buy.”

The Prime Minister said that by introducing long-term, fixed-rate mortgages of up to 95 per cent of the value of the home, it would “give the chance of home ownership and all the pride that goes with it to millions who currently feel excluded.”

The government has yet to reveal specific details about the scheme, including when it will launch, but it is expected to allow two million more people to become homeowners.

The announcement marked some positive news for aspiring homeowners after more than 1,000 low-deposit mortgage deals have vanished from the housing market since the pandemic broke out in March. By early September, there were just 76 deals for borrowers with a deposit of 10 per cent or less.

By comparison, in March there were 1,184 mortgages at 90 per cent, 95 per cent or 100 loan-to-value available, amounting to a fall of 1,108 deals in a six month period.