Skipton Building Society has released a mortgage for first-time buyers which allows them to delay their first mortgage payments for three months.
The idea behind the Delayed Start mortgage is that new buyers will be able to settle into their new home and have additional money to cover the initial costs of homeownership.
It comes in response to research of 1,000 people who had bought their first home in the last five years. Skipton discovered they were spending upwards of £30,000 in the first three months of moving and this meant 63% were feeling financially strained.
What’s more 71% said the entire moving process cost a lot more than expected.
It also found first-time buyers spend £3,500 on average on furniture to kit out their homes, £2,600 on kitchen appliances but they are also forking out a typical bill of £1,700 on removal companies.
For many first-time buyers these can be unexpected costs and it can come when they are still paying rent if rental agreements and completion overlap.
Indeed, Skipton found, 43% had difficulties lining up their move with the end of their lease.
Skipton hopes its new product will allow buyers to have some financial breathing space to get their homes kitted out and cover some of the other expenses before they begin paying their mortgage repayments.
Jen Lloyd, head of mortgage products at Skipton, said: “We hope that this product will help first-time buyers settle into their new home and help ease the strain of the costs that come with buying first home that go beyond the deposit.
“At Skipton, we believe in fairness, that’s exactly why we’ve launched our new Delayed Start Mortgage – to give first-time buyers a fair start in their new home, and the breathing space they need in those critical first few months.”
Delayed Start mortgage – what to consider
The mortgage is available to buyers who need to borrow up to 95% loan-to-value (LTV) and rates start at 4.87% for a two-year fixed rate for 90% LTV borrowing.
The highest rate available is 5.40% for a two-year fixed rate new build mortgage at 95% LTV.
Whilst no repayments are made for the first three months, interest begins being charged from day one and will be added to the overall mortgage balance.
This point is important to note for anyone considering this mortgage as it will impact your repayments further down the line.
Justin Moy, managing director at EHF Mortgages, speaking via the Newspage Agency, said: “It is more a cash flow tool than a freebie, with the interest added to the mortgage for the three months, which could add £3,000 or £4,000 to the balance of a typical £250,000 mortgage, which might go unnoticed until you look to take a new deal in a few years’ time.
“For those needing that cash flow support this is a great opportunity to buy and not have to borrow on credit cards to purchase furniture, but just remember that there is no such thing as a free lunch, especially with mortgages.”
Most brokers have applauded Skipton for coming out with an innovative product for first-time buyers. However, they also urged caution.
Harry Goodliffe, director at HTG Mortgages, via Newspage, said: “It’s an interesting move from Skipton and, for the right buyer, it could help bridge that painful gap between renting and buying.
“But let’s be real: if you need a break before you’ve even started, it’s worth asking whether the timing’s right.
“Interest still racks up from day one, so this isn’t free money. It’s a lifeline, not a longer term fix. Used right, though, it could help first-time buyers secure their dream home.”
