The best mortgage for low deposits - Video script

John Fitzsimons looks at an ace deal for borrowers with only a 15% deposit

First Direct have launched a brilliant mortgage, specifically aimed at borrowers with small deposits. While such mortgages are inevitably a bit more expensive than those for borrowers with 40% equity, for example, this deal is still an absolute steal for borrowers with less to put down upfront.

Cheap for a lifetime

The First Direct mortgage is a lifetime tracker, available to borrowers with a deposit of just 15%. It follows Bank Base Rate plus 3.49% for the life of the mortgage, so currently you’d be paying 3.99% on your mortgage, a pretty low rate. Trackers look pretty attractive at the moment, with Bank Base Rate continuing to stick to its current record low, and few signs that it will increase any time soon.

It won’t cost you a fortune

What’s more, it comes with a really small product fee of £499! This is very significant when you consider some rival variable rates on the market at the moment. For example, Cheltenham & Gloucester are offering a two-year variable at Bank Base Rate plus 2%. However the C&G deal has a product fee of 3%! On a £150,000 mortgage, that’s £4,500, which would rule it out for many borrowers.

Emergency exit

In addition, if Bank Base Rate does jolt up suddenly, to the point that you really need to switch to a fixed rate, it will only cost you £149 to get out of the First Direct deal, compared to either 3% or 2% of the mortgage with Cheltenham and Gloucester, depending on which year you choose to leave. This is a great selling point in my view.

This lifetime tracker is brilliant for all borrowers with a small deposit, no matter how long you think Base Rate will stay low. If it stays low for a number of years, you get the full benefit of low repayments for that entire period. And if it jumps quickly, you can get out of it and onto the safety of a cheaper fixed mortgage, for a tiny fee.