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Post updated: March 11th, 2025
7 minute read
Yorkshire Building Society has launched a 99% mortgage that enables first time buyers with a £5,000 deposit to buy a house worth up to £500,000. The same mortgage is also offered through Accord Mortgages, Yorkshire Building Society’s broker-only arm. We explain how it works and weigh up the pros and cons.
A 1% deposit mortgage means you’ll only need to put down 1% of the value of the property you’re buying as a deposit. Here’s how it works if you’re buying a £500,000 house with a 1% deposit mortgage:
| House value | Deposit required | Mortgage amount |
|---|---|---|
| £500,000 | £5,000 | £495,000 |
By comparison, here’s how much you’d need to put down if you’re buying with a 5% deposit:
| House value | Deposit required | Mortgage amount |
|---|---|---|
| £500,000 | £25,000 | £475,000 |
The Yorkshire Building Society 1% deposit mortgage – also being marketed as the “£5,000 deposit mortgage” – is a 5 year fixed-rate mortgage available at a rate of 5.74%. It does have some eligibility criteria:
And it’s important to note there is a minimum £5k deposit whether you borrow between £100k or £495,000. So it is only a 1% deposit mortgage if you take out the maximum loan size of £495,000.
Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.
| Amount borrowed over 30 years | Mortgage deposit % | Mortgage rate | Monthly mortgage payment |
|---|---|---|---|
| £250,000 | 1% | 5.74% | £1,457 |
| £250,000 | 5% | 5.35%* | £1,396 |
You’ll also need to be able to borrow a big enough mortgage based on your financial circumstances. Lenders usually offer a maximum of 4.5 times a first time buyer’s annual income.
If you want to borrow less than £495,000 you’ll need a smaller minimum income, but you’ll still need a £5,000 deposit so it won’t be a 1 per cent mortgage.
The average house price in the UK is £292,000 according to Land Registry figures. To buy a £292,000 house with this mortgage, you’ll need a £5,000 deposit and a mortgage for the remaining £287,000. To borrow this amount you’ll typically need a combined income of at least £63,700.
However, some lenders will let you borrow a greater multiple of your income. So it’s advisable to speak to a fee-free mortgage broker. Also, read our guide How much can I afford to borrow on a mortgage?
You’re in negative equity when the value of your mortgage is bigger than the value of your property and the smaller your deposit, the greater the risk of negative equity if the value of your property falls. For example:
And it’s not uncommon: according to MoneyHelper, it’s estimated there’s around half a million properties in negative equity in the UK.
Yorkshire Building Society’s 1% mortgage requires you to take the mortgage out for 5 years. The idea is you’ll have built up enough equity in your home over the 5 years that you can remortgage onto better deal at the end of your term. You’ll typically need at least a 5% deposit (or equity in your home) to remortgage
| Amount borrowed | Balance after 5 years at 5.74% | Available deposit for your next mortgage |
|---|---|---|
| £250,000 | £231,866 | 7.35% |
Assuming house values don’t fall significantly over the next 5 years you should be able to remortgage onto a 5% deposit mortgage at the end of your initial mortgage term. But this assumes these mortgage deals will be available in 5 years time.
There are other fees you’ll need to budget for when buying a house such as conveyancing fees and the cost of a survey too. Plus you may need to pay stamp duty too. Find out more in our guide The costs of buying a house.
When the rumours that the previous government was planning a 1% deposit mortgage scheme were reported, many experts voiced concerns that a 1 percent deposit mortgage scheme will lead to more people buying, which would over-stimulate the market and increase demand for housing. However, the government’s plans did not materialise.
We have yet to see figures of how many people have taken up this 1% deposit mortgage. However, according to figures from Halifax, in 2023, the average deposit put down on a first home was £54,116 – around 19% of the property price. It’s clear that most first time buyers understand the benefit of a bigger deposit, allowing them to access cheaper mortgage rates which in turn make their monthly repayments more affordable. So many first time buyers may be reluctant to take out such a low deposit mortgage.
However, it’s very likely that there will be potential first time buyers who are currently locked out of being able to buy a home, who will find this scheme appealing.
If you have a low deposit, the government has a range of other schemes to help you afford to buy your home. These include:
Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.
March 25, 2025 
