Major bank launches new mortgage giving renters with a small deposit a 5% discount on their first home
A MAJOR bank has launched a new mortgage and it gives renters with a small deposit a 5% discount on their first home.
TSB has today launched a new “5&5” concessionary mortgage option for its customers.
Under the lender’s new scheme, landlords would offer their tenants a 5% discount on the property’s market value in exchange for putting down a minimum of a 5% deposit.
Concessionary mortgages allows wannabe homeowners to bag a property for less than the market value.
They are usually used by landlords selling a house to their tenants, or someone selling a property to a relative.
This might not sound like it makes sense, but there are situations where it is beneficial for the person to sell the property below market value.
For example, a landlord looking to sell could skip the hassle of a formal sales process and paying estate agent fees.
For a tenant, it would mean they get to buy the house they already live in for a discount.
Roland McCormack, mortgage distribution director at TSB, said that increased mortgage costs mean many landlords want to “release their gains and exit the market”.
He added: “[A] 5% discount could be entirely offset by the savings on estate agency fees and not missing out on several months of rental payments.”
TSB said this scheme will operate in addition to its 10% scheme.
This is where landlords sell their property to a tenant with a 10% discount or more on its market value.
A number of lenders offer some variation of this mortgage type including Barclays and Natwest.
One of the main draws of these deals is that you either need a very small deposit or none at all.
Take TSB’s latest 5&5 mortgage as an example of this.
So if a tenant wanted to buy the home they rent, which is valued at £200,000, with the 5% discount the price they would pay is £190,000.
Under the agreement, they would also be asked for a minimum deposit of 5%, which in this case would work out at £9,500.
If you find your lender does not offer a concessionary mortgage there are still plenty of first-time buyer schemes which could help you get on the ladder.
For example, Skipton Building Society Track Record Mortgage offers you a no-deposit option if you can show you have been paying rent for a year or more.
The Sun recently rounded up the best first-time buyer mortgages which you can check out here.
TOUGH TIMES FOR FIRST TIME BUYERS
It comes as affordability remains a barrier to entry for many prospective buyers.
Figures released by Halifax this morning showed the average house price has now risen to £297,166, compared to £287,535 at this time last year.
And while some have taken advantage of falling mortgage rates, high costs are still expected to crush the dreams of would-be homeowners.
Halifax’s Amanda Bryden said: “Latest figures continue to show improving levels of demand for mortgages, as an easing in mortgage rates boost buyer confidence.
“However, despite these positive trends, many potential buyers and movers still face significant affordability challenges and buyer confidence may be tested against a changeable economic backdrop.”
Meanwhile, stamp duty relief available to first-time buyers since 2022 will end in April 2025.
As a result, a first-time buyer purchasing a property valued at £425,000 will incur a stamp duty charge of £6,250.
Different types of mortgages
We break down all you need to know about mortgages and what categories they fall into.
A fixed rate mortgage provides an interest rate that remains the same for an agreed period such as two, five or even 10 years.
Your monthly repayments would remain the same for the whole deal period.
There are a few different types of variable mortgages and, as the name suggests, the rates can change.
A tracker mortgage sets your rate a certain percentage above or below an external benchmark.
This is usually the Bank of England base rate or a bank may have its figure.
If the base rate rises, so will your mortgage but if it drops then your monthly repayments will be reduced.
A standard variable rate (SVR) is a default rate offered by banks. You usually revert to this at the end of a fixed deal term, unless you get a new one.
SVRs are generally higher than other types of mortgage, so if you’re on one then you’re likely to be paying more than you need to.
Variable rate mortgages often don’t have exit fees while a fixed rate could do.