Aspiring first-time buyers can now get a savings account designed to help them save for a deposit from Yorkshire Building Society.
The new regular saver deal comes alongside Yorkshire Building Society’s 99 per cent mortgage, which was also launched this week.
The mortgage will allow first time buyers with a £5,000 deposit to purchase a property valued at up to £500,000.
It means first-time buyers will be able to potentially get on the ladder with as little as a 1 per cent deposit.
Helping hand: Yorkshire Building Society has launched a regular saver aimed at first-time buyers, alongside its 99% mortgage offer
What’s the small print on the account?
Yorkshire Building Society’s regular saver will allow savers to put in £500 a month for two years. It has a 5 per cent interest rate, which is variable meaning it could go up or down over the two-year period.
Savers will be able to withdraw money from their savings on one day each year – the anniversary of the account opening – without incurring any penalty. They can also close the account if needed.
The maximum balance before interest cannot be more than £12,000 by the end of the two-year term.
The account can be opened online or in branch. After two years, the regular saver turns into an easy-access online account.
How long would it take to build up a £5,000 deposit?
A saver putting in the full allowance of £500 a month over two years would build up substantially more than the minimum £5,000 deposit needed for Yorkshire Building Society’s £5,000 mortgage.
A saver depositing £500 per month with the 5 per cent regular saver would have a balance of £12,632.35 at the end of two years.
This assumes the first £500 deposit was made on 1 April 2024 and savers continued to make a £500 deposit on the first day of each month over the two-year period. It also assumes that the interest rate does not change from 5 per cent over the two years.
The interest on the account is paid annually, meaning that while interest will continue to build up in the first year, it won’t be paid out until the end of it – unless the account is closed before that.
Therefore, it would take 10 months for a saver depositing £500 a month in the account to build up a £5,000 deposit – with no accounting for interest as it would not yet have been paid.
Savers who can’t save as much as £500 a month would build up a £5,000 deposit in 1 year and 1 month if they saved £400 a month in the regular saver, 1 year and 5 months if they saved £300 a month, 2 years if they saved £200 a month and 3 years and 9 months if they saved £100 a month.
What are the alternatives?
A saver putting £500 a month in the best easy-access account accepting deposits this low – which is Yorkshire Building Society’s rainy day saver paying 5 per cent – would have built up a pot of £12,592.96 in two years.
It would take 10 months for a saver to build up a £5,000 deposit with this account and deposits of £500 a month.
Coventry Building Society also has a first home regular saver. It allows savers to put up to £1,000 a month in it for 36 and pays a rate of 5.05 per cent.
A saver would amass £38,886.32 if they had put £1,000 in this account on 1 November 2023 and then on the first on of each following month for 36 months. Coventry offers a £500 bonus if savers take out a mortgage with the building society.
Leeds Building Society’s home deposit regular saver pays 5.15 per cent on monthly deposits up to £500 a month. The interest is calculated daily and paid annually on 28 March.
If a saver deposits £500 in the account at the time it is opened and on the last day of each following month for 12 months, the total balance in the account will be £6,141.63.
Progressive Building Society’s regular saver lets first time buyers save up to £500 a month paying 4 per cent interest. The account is only for existing members and new customers resident in Northern Ireland.
Commenting on the new regular saver, Pete Lewis of Yorkshire Building Society said: ‘Following the launch of our new mortgage product to help support people to achieve their homeownership dreams, we want to ensure we are also helping people to save and achieve that £5,000 deposit in the first place.
‘Regular savings accounts are one way we can encourage our members to establish healthy savings habits as well as save for their dreams and goals.
‘We’re really proud that this new account, while promoting saving little and often also offers a competitive return and supports would-be homeowners build towards a deposit.’
