A new savings product called Save to Buy will allow first time buyers access to 95% mortgages.
The scheme from Nationwide Building Society offers higher loan to value mortgages as long as customers open a specially designed savings account for building up a deposit.
Customers only need £50 to open the account, which offers a 2.5% interest rate on balances as high as £20,000, but they have to save at least £50 per month for at least three-quarters of the year to be given the mortgage.
In addition, the account must receive payments for at least six months but there is a cash back reward of up to £1,000 for savers who go on to take out a Nationwide 95% mortgage.
Major housebuilders will welcome Save to Buy, which is being launched today, as they regularly mention poor loan to values for first time buyers as the biggest drag on the market.
The head of mortgages at Nationwide, Martyn Dyson, said the society knows there is a need for 5% deposit mortgages for first time buyers which are not widely available.
