couple finding out about Deposit UnlockBy John Cossons, Mortgage and Protection Designer at Anstee & Co.

First-time buyers and home movers can now buy a new-build home with a deposit of just 5 per cent without the need for government help, using Deposit Unlock.

Lenders generally set the minimum deposit for new builds at 10 or 15 per cent. Putting them out of reach for many buyers. This is because lenders fear they can lose their value quickly after they are purchased.

The current Help to Buy scheme gets around this by offering, first-time buyers only, a loan from the Government making up 20 per cent of the purchase price with the borrower providing a 5 per cent deposit. However, the Help to Buy scheme is due to end in March 2023.

What is Deposit Unlock?

The new Deposit Unlock scheme was started by the Home Builders Federation and aims to help first time buyers and home movers to buy a new build home with a 5 per cent deposit.

The scheme was started in June this year with The Newcastle Building Society offering a trial on four new build sites in the North East.

The Nationwide Building Society, one of the largest lenders in the country, has recently signed up for the scheme and offers it on standard new build loans between £25,000 and £750,000. At the time of writing the Newcastle and Nationwide building societies were the only lenders offering Deposit Unlock, however, it is expected that other lenders will join the scheme in the future.

In the same way as the current Help to Buy scheme, it will be restricted to homes built by builders who have also signed up to Deposit Unlock. Currently, most of the large national developers such as Barratt, David Wilson Homes, Taylor Wimpey, Keepmoat and Bellway, have signed up with others expected to join soon.

How does Deposit Unlock work?

Deposit Unlock logoWhen lending on homes they perceive as riskier, lenders sometimes take out insurance, known as indemnity insurance.

This means they can recoup some of the costs if a home is repossessed, and they cannot sell it for an amount equal to the outstanding mortgage. Taking out this insurance costs them money.

Under Deposit Unlock, the housebuilders will pay to insure the mortgages, instead of the lenders using a portion of the money they get from selling the homes to do so.

What are the interest rates and conditions?

Each lender will have its own interest rates and affordability criteria for Deposit Unlock loans, so terms and conditions will vary.

Nationwide offers loans on properties between £25,000 and £750,000, with rates that mirror those on its regular 95% mortgages.

How does it differ from Help to Buy?

help to buy logo for best mortgage dealIn the same way as Help to Buy, Deposit Unlock allows buyers to purchase a new-build home with a 5 per cent deposit.

However, unlike Help to Buy, where 20 per cent of the purchase price is borrowed from the Government and the rest from a mortgage lender. With Deposit Unlock the buyers borrow the whole balance from their lender.

There are a few financial differences. The Help to Buy government loan is interest only, and repayment free for the first five years, but the amount that must be repaid at any time is 20 per cent of the property’s value, so will be more than was borrowed in a rising property market. As you would borrow a lower percentage from the lender. The initial interest rate will also be lower than a standard 95 per cent mortgage.

Help to Buy is restricted to first-time buyers and is due to end completely in March 2023.

How does it differ from the Government’s mortgage guarantee scheme?

Since April this year, some mortgage lenders have been offering mortgages with 5 per cent deposits under the Government’s mortgage guarantee scheme. This will run until the end of 2022.

That scheme is only available on pre-owned homes, so is not available for new build homes.

How Anstee & Co. can help you with buying your next home.

We are independent mortgage brokers. This means that the mortgage advice we offer is unbiased. We will look at all the options available to you to ensure you get the mortgage deal that is right for you. We would welcome the opportunity to have a coffee with you and discuss how we can provide the advice and help required.

If you want to find out more about Deposit Unlocked or wish to review your existing mortgage, why not contact us.

call back logo for help with Deposit UnblockOur offices are located at-

  • Kettering, Northamptonshire
  • Stamford, Lincolnshire
  • Towcester, Northamptonshire
  • London, Greater London

We make full use of video conferencing facilities such as-

  • Zoom
  • Microsoft Teams
  • Skype
  • Facetime

Additionally, we can also arrange a conference telephone call. There is no need to visit an office as all work can be handled remotely.

So, if you have any thoughts or comments on this article, “Deposit Unlock. Help when buying a New Home.”, then we would love to hear from you.

Financial Conduct AuthorityFinally, the information contained in this article is for information purposes only and does not constitute advice. No action should be taken based on this information alone. Anstee & Co. is authorised and regulated by the Financial Conduct Authority (FCA).

AS A MORTGAGE IS SECURED AGAINST YOUR HOME, IT COULD BE REPOSSESSED IF YOU DO NOT KEEP UP THE MORTGAGE REPAYMENTS.