Mortgages  

Deposit Unlock scheme launches with first lender

Deposit Unlock scheme launches with first lender

New mortgage indemnity scheme ‘Deposit Unlock’ has launched with its first lender, Newcastle Building Society.

The scheme was developed by the Home Builders Federation and its members, which include Newcastle BS.

It is managed by reinsurance broker Gallagher Re, which initially consulted on its creation.

The scheme is designed to help borrowers secure a new-build home up to a value of £330,000 with a deposit of just 5 per cent, acting as an alternative to the UK government’s 95 per cent mortgage guarantee scheme and Help to Buy, which is set to close in March 2023.

Deposit Unlock is still only available on selected plots in the North East of England, through the following four participating house builders: Barratt Developments, Bellway, Keepmoat and Vistry. 

But this is set to change as more lenders adopt the scheme. Newcastle BS said in an announcement today (June 23): “The scheme will roll out to the rest of the UK in the coming months.”

Intermediary Mortgage Lenders Association’s (IMLA) executive director, Kate Davies, called the launch “a positive step forward in the provision of low-deposit lending”.

She continued: “It will open another door for those wanting to buy properties that have traditionally been more difficult to finance.

Davies said the announcement of Help to Buy’s 2023 shelf life “signalled a clear need for viable alternatives like these, to help more people step onto the property ladder, as well as progressing up it”.

Lenders signed up to the UK government’s mortgage guarantee scheme cannot also sign up to the Deposit Unlock scheme, however. The mortgage guarantee scheme allows lenders to offer government backed 95 per cent mortgages to borrowers.

Newcastle BS’ Deposit Unlock offerings start at 3.5 per cent for a two-year fixed rate mortgage. A five-year fixed rate is also available at 3.75 per cent. Both products are fee-free, according to the lender.

“People looking to buy new-build homes need new options and we recognise there is an urgent need for more homes to be built,” said Andrew Haigh, Newcastle BS’ chief executive.

Steve Rance, Gallagher Re’s managing partner, added: “With the insurance indemnities effectively funded by the house builder community, Newcastle BS quickly recognised this as a long-term, commercial and sustainable solution that would unlock the return of 95 per cent loan-to-value mortgages in the new build space.”

Newcastle BS is also one of the first lenders to support the government’s First Homes scheme.

IMLA’s Davies thinks “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”.

She continued: “Growing competition in this area can only benefit consumers, as they seek products which fit their individual needs.”

ruby.hinchliffe@ft.com