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- Yorkshire Building Society is launching a regular savings campaign for first-time buyers
- Savers can deposit up to €500 per month into the account, on which 5% interest is paid
Aspiring first-time buyers can now get a savings account to help them save for a deposit from the Yorkshire Building Society.
The new regular savings deal comes in addition to Yorkshire Building Society’s 99 per cent mortgage, which was also launched this week.
The mortgage allows first-time buyers to purchase a home worth up to £500,000 with a £5,000 deposit.
It means that first-time buyers may be able to get on the ladder with as little as a 1 percent deposit.
Helping hand: Yorkshire Building Society has launched a regular saver aimed at first-time buyers in addition to its 99% mortgage offer
What is the fine print on the bill?
Yorkshire Building Society’s regular saver allows savers to put in £500 a month for two years. The interest rate is 5 percent and is variable, meaning it can increase or decrease over a two-year period.
Savers will be able to withdraw money from their savings on one day per year (the anniversary of the account opening) without having to pay a penalty. If necessary, they can also close the account.
The maximum balance before interest must not exceed £12,000 at the end of the two-year term.
The account can be opened online or in a branch. After two years, the regular saver changes into an easily accessible online account.
How long would it take to build up a £5,000 deposit?
A saver who puts in the full £500 a month for two years would build up considerably more than the £5,000 minimum deposit required for the Yorkshire Building Society’s £5,000 mortgage.
A saver who deposits €500 per month with the 5 percent fixed saver would have a balance of €12,632.35 at the end of two years.
This assumes that the first deposit of £500 was made on April 1, 2024 and that savers continued to make a deposit of £500 on the first day of each month over the two-year period. It also assumes that the interest rate does not change from 5 percent over the two years.
The interest on the account is paid annually, which means that although the interest continues to accrue during the first year, it is not paid out until the end unless the account is closed earlier.
Therefore, it would take 10 months for a saver paying £500 a month into the account to build up a deposit of £5,000 – without taking into account interest, as this would not have been paid yet.
Savers who cannot save as much as £500 per month would build up a deposit of £5,000 in 1 year and 1 month if they save £400 per month in the regular saver, and in 1 year and 5 months if they save £300 per month savings , 2 years if they save £200 per month and 3 years and 9 months if they save £100 per month.
What are the alternatives?
A saver putting £500 a month into the most accessible account and accepting such low deposits (i.e. Yorkshire Building Society’s rainy day saver who pays 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 deposit of €5,000 in this account and deposits of €500 per month.
Coventry Building Society also has its first regular home saver. It allows savers to put in up to £1,000 a month for 36 years and pays a rate of 5.05 per cent.
A saver would accumulate $38,886.32 if he deposited $1,000 into this account on November 1, 2023, and on the first of each subsequent month thereafter for 36 months. Coventry is offering a £500 bonus if savers take out a mortgage with the building society.
Leeds Building Society’s regular home deposit saver pays 5.15 per cent on monthly deposits up to £500 per month. Interest is calculated daily and paid out annually on March 28.
If a saver deposits £500 into the account at the time it is opened and on the last day of each subsequent month for 12 months, the total balance in the account will be £6,141.63.
Progressive Building Society’s regular savings account allows first-time buyers to save up to £500 a month at 4 per cent interest. The account is only for existing members and new customers living in Northern Ireland.
Commenting on the new regular saver, Yorkshire Building Society’s Pete Lewis said: ‘Following the launch of our new mortgage product to help people achieve their home ownership dreams, we want to ensure we also help people save and to reach that £5,000. deposit in the first place.
“Regular savings accounts are one way we can encourage our members to adopt healthy savings habits and save for their dreams and goals.
“We are very proud that this new account promotes low savings, but often also offers competitive returns and supports potential homeowners as they build a down payment.”
