First time buyers trying to build their deposit might be interested to learn that Newcastle Building Society, has launched an innovative mortgage exclusively for its cash Lifetime ISA first time buyer customers.

The Society’s Deposit Booster mortgage provides £2,000 towards a deposit (payable at completion) for a Newcastle Lifetime ISA customer’s first home, building on the 25 per cent government savings bonus alongside the Lifetime ISA product.

The Lifetime ISA can be used to save a deposit for a first home or for retirement.  First time buyers must have saved into their Lifetime ISA for at least one year to access their funds penalty free.

Savers gain their 25 per cent government bonus monthly and any Newcastle Lifetime ISA customer qualifies for the Society’s mortgage deposit booster cash bonus. 1

Customers can transfer their Lifetime ISA from another provider and still qualify for the Deposit Booster mortgage.

Period of time LISA has been saved into Penalty on withdrawal of LISA funds (loss of government bonus means savers will lose more than saved) Access to Deposit Booster mortgage
Saving for more than 12 months with Newcastle Building Society or another provider No Yes
Saving for less than 12 months with Newcastle Building Society or another provider Yes Yes

The Society’s Deposit Booster mortgages are available on two and five year fixed rates and homebuyers need just a 5 per cent deposit (the £2,000 deposit booster can be used towards the 5 per cent deposit).  The two year fixed rate is at 3.25 per cent (5.3 per cent APRC) or for first time buyers wanting to fix their mortgage repayments for longer, a five year fix is available at 3.39 per cent (5.0 per cent APRC).

Stuart Miller, customer director of Newcastle Building Society, said: “Following the launch of our Lifetime ISA in 2018, we’ve been looking at a variety of ways to help those saving for their first home.  We understand from research we’ve conducted with our Lifetime ISA customers, that one of the main barriers they’re facing is building their deposit.

“Which is why we’re delighted to introduce our Deposit Booster mortgage.  This gives our Lifetime ISA customers an extra £2,000, on top of the 25 per cent government bonus, giving a boost to their deposit.”

The £2,000 is issued at completion alongside the mortgage funds, so it can be added to the buyer’s deposit.  The £2,000 cashback can only be used towards the house deposit.

For a first time buyer looking to buy a £177,000 property (average national property price) and requiring a 5 per cent deposit of £8,850, combining these two products would make it achievable through saving £5,480 (£2,000 deposit boost and £1,370 LISA Bonus).

An example of how the deposit booster mortgage works is as follows:

Average national property price                            £177,000 (source: landregistry.gov.uk)

5% Deposit required                                               £8,850

Deposit Booster                                                      £2,000

Savings                                                                    £5,480

LISA bonus                                                               £1,370

If you are using Lifetime ISA as your sole savings account, you can achieve your savings total by saving £5,480 and receive a 25% bonus of £1,370 (annual subscription limits apply).

First time buyers would also be required to pay other fees and charges (ie Conveyancing).

Lifetime ISA savers will only receive the Government’s 25 per cent bonus if they go on to use the savings in their Lifetime ISA towards the deposit on their first home and/or towards their retirement. If savers make a withdrawal not connected to these two events then a 25 per cent penalty will apply to the amount withdrawn. This will recover the Government’s bonus and savers will get back less than they have saved.

For full details or advice on the first time buyer range and to speak to a friendly mortgage adviser, call Newcastle Building Society on 0345 606 4488 from Monday to Friday, 8am to 8pm and Saturday, 9am to 3pm.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

PRODUCT INFORMATION:

  • 25% Fixed Rate until 30 April 2022 followed by our Discounted Variable Rate, currently 4.49% until 30 April 2025 and then Standard Variable Rate thereafter, currently 5.99%
  • The overall cost for comparison is 3% % APRC
  • No Reservation Fee
  • No Completion Fee
  • Maximum LTV 95%
  • Minimum Loan £75,000
  • Maximum Loan £400,000
  • Free Valuation (on properties up to and including £500,000)
  • £2,000 deposit boost
  • 10% overpayments of balance per annum
  • 2% Early Repayment Charge until 30 April 2021
  • 1% Early Repayment Charge until 30 April 2022
  • If you borrowed £120,000 over 25 years, the cost for credit would be £97,484.60 meaning you repay a total of £217,484.60 This would be repaid by 24 monthly repayments of £584.78 followed by 36 monthly repayments of £58 and then a further 240 monthly repayments of £748.10.

 PRODUCT INFORMATION:

  • 39% Fixed Rate until 30 April 2025 and then Standard Variable Rate thereafter, currently 5.99%
  • The overall cost for comparison is 0 % APRC
  • No Reservation Fee
  • No Completion Fee
  • Maximum LTV 95%
  • Minimum Loan £75,000
  • Maximum Loan £400,000
  • Free Valuation (on properties up to and including £500,000)
  • £2,000 deposit boost
  • 10% overpayments of balance per annum
  • 5% Early Repayment Charge until 30 April 2021
  • 4% Early Repayment Charge until 30 April 2022
  • 3% Early Repayment Charge until 30 April 2023
  • 2% Early Repayment Charge until 30 April 2024
  • 1% Early Repayment Charge until 30 April 2025
  • If you borrowed £120,000 over 25 years, the cost for credit would be £93,346.40 meaning you repay a total of £213,346.40. This would be repaid by 60 monthly repayments of £593.69 followed by 240 monthly repayments of £740.00.

Editors notes –

1 Lifetime ISA customers can withdraw money from their Lifetime ISA before the 12 months to utilise the deposit booster mortgage product, but will face a Government penalty for withdrawal before the 12 months and will lose more than they’ve saved.