Newcastle Building Society has launched a new-build product range at 95% loan-to-value (LTV) under Deposit Unlock.
Rates within the range start at 3.50% for a 2-year fixed rate offering.
The mortgages are initially available on selected plots in the North East of England through four participating house builders; Barratt Developments, Bellway, Keepmoat and Vistry.
Deposit Unlock is a mortgage indemnity scheme developed with the Home Builders Federation and insurance brokers Gallagher Re.
The scheme aims to help borrowers secure a new-build home up to a value of £330,000 with a deposit of just 5%.
A 5-year fixed rate is also available at 3.75%. Both products are fee-free and come with a free valuation to further support low-deposit borrowers.
Stuart Miller, chief customer officer at Newcastle Building Society, said: “More than ever, we need to help provide more options for low-deposit borrowers looking to buy a new-build home.
“Deposit Unlock is a truly innovative initiative and we’re pleased to be the first lender to offer products under the scheme.”
“Both Deposit Unlock and First Homes are examples of forward-thinking collaboration, bringing new products to the market to help people achieve the dream of owning their own home.”
Paul Broadhead, head of mortgage & housing policy at the BSA, added: “Deposit Unlock is a great example of a private sector initiative which addresses an important social challenge – helping people to buy their own home.
“This support for higher loan to value lending on new homes will be particularly helpful for younger buyers who often struggle to save for a deposit while paying rent at the same time.
“Our research shows that raising a deposit is now the single biggest barrier to would-be buyers.
“Building societies are synonymous with home ownership and it is good to see Newcastle Building Society leading the way as the first lender to sign up. I am confident that more will follow.”
Kate Davies, executive director of IMLA, said: “Today’s news of the launch of Deposit Unlock is a positive step forward in the provision of low-deposit lending and will open another door for those wanting to buy properties that have traditionally been more difficult to finance – such as new-build homes and flats.
“The government’s announcement that its Help to Buy Equity Loan scheme would be withdrawn in 2023 signalled a clear need for viable alternatives like these, to help more people step onto the property ladder, as well as progressing up it.
“There are, of course, other providers developing innovative schemes aimed at providing an alternative to Help to Buy.
“IMLA is pleased to have been able to facilitate discussions between providers and members and we are delighted that one of our members – Newcastle Building Society – is the first to launch with Deposit Unlock. We wish it every success.
“It will be interesting to see how this launch encourages and stimulates other providers and lenders to continue to find creative solutions to the challenges faced by buyers.
“Growing competition in this area can only benefit consumers, as they seek products which fit their individual needs.”