A major new savings account designed to help first-time buyers has been launched by the Nottingham Building Society.
The First Home Saver account specifically caters for the needs of people who want to own a home for the first time, but don’t yet have a deposit.
It pays up to 3.5% to anyone with £5,000 or more invested in their account and can be opened in single or joint names with a minimum deposit of £10.
The product also offers a £250 cash-back incentive to any buyer who takes out a mortgage through the Nottingham.
This includes its first-time buyer mortgage, which offers advances of up to 95% of the value of a property, so anyone willing to save £200 per month, or £50 per week, for three years will have built up a fund of £7,591 that can be used as a deposit to buy their new home.
However, the account is branch-based and so is only open to customers in the East Midlands and South Yorkshire area.
It’s now the norm for first-time buyers in the East Midlands to be asked put down a 15% deposit when they buy a home in the region which, on average, costs £90,000.
This means the average first time buyer is now required to find more than £13,000 as a deposit which is difficult for many would-be homeowners in the region.
The Nottingham’s Clare Roberts said: ‘Something radical has got to happen for the first-time buyer market to come back to life.
‘By any standards, £13,000 is a lot of money to find – and, in the current climate, it will be very hard to get their hands on a deposit unless they are prepared to save,’ she said.
However, other products are on the market and Cathy Neal, senior researcher at Which? advises savers to shop around.
‘ Just because a product is marketed at a certain type of saver, it doesn’t mean it’s the best deal out there for them. You could get much better rates from our Best Buys.
‘This account only pays 3% if you have £2,999 or less but you could get 3.75% from Yorkshire Building Society from £1 and probably more from a regular savings account, though you may not be able to withdraw your money for a year and have to pay in a certain amount each month with this type of account.
‘Although this gives a £250 bonus if you if you take out a Nottingham BS mortgage, it may not offer the best deal for you.’
She added, ‘You could earn even more interest from an Isa as it’s tax-free, so you should always save your first £3,600 into a cash Isa each year before putting any money into an ordinary savings account.’
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