99% Mortgages in the UK for First Time Buyers? Only 1% Deposit Required.

In a groundbreaking move, the UK government is considering introducing 99% mortgages, a scheme aimed at supporting First Time Buyers stuck in the rental cycle struggling to climb onto the property ladder. This plan, pivotal to the upcoming spring Budget, is tailored for young Britons, allowing them to secure a home with just a 1% deposit. We explore the impact if this does actually happen, and we ask the question: Is this just a flash election move to secure younger votes from Prime Minister Rishi Sunak and his Cabinet?

A Closer Look at the Numbers

Imagine the prospect of purchasing a home worth £285,000 with just £2,850 down instead of £28,500 based on the latest statistics for the average house price in the UK. The idea is incredibly enticing, especially for first-time buyers eager to own their home without the formidable hurdle of a large deposit. This scenario becomes possible under the proposed 99% mortgage scheme, where the traditional financial barriers to homeownership seem to dissolve, making the dream of owning a property more accessible than ever before.

Source: ONS.gov.uk

Solving the problem, or potentially creating another housing bubble?

While this initiative opens doors for many, it’s not without its complexities. Experts caution against potential market overheating and inflation in house prices, underscoring the need for a balanced approach. Introducing such a high loan-to-value mortgage could inflate property prices. As more people find themselves able to afford homes, demand could surge, driving prices up and potentially creating a housing bubble.

The challenges of meeting affordability criteria for monthly payments pose another concern. While the initial deposit is dramatically reduced, the long-term financial commitment is not. Buyers must be prepared to manage potentially higher monthly mortgage repayments, which might increase due to the high loan-to-value ratio. Additionally, should interest rates rise, those on variable or tracker mortgages could find themselves facing unaffordable increases in their monthly payments.

These factors underscore the importance of carefully considering one’s long-term financial stability before committing to such a mortgage. While the 1% deposit initiative could open doors for many, it is essential to ensure that this step towards homeownership is sustainable over the years, safeguarding against financial strain and market volatility.


For expert advice and assistance on buying your first home with Help to Buy or to find out about the current available schemes to help First Time Buyers, visit Mortgage Advice or read more here if you are looking to buy your first home: When Should I Get an Agreement in Principle?