98% mortgage launched by The Cambridge Building Society
Unique product is part of mutual's 'Making a difference' strategy
The Cambridge Building Society is launching a unique mortgage for first-time buyers that requires a deposit of just two per cent.
It is part of a wider commitment to help local people get a home, inspired by the mutual’s original purpose.
Limited to £270,000 in loan value and with a 35-year term, the mortgage will be available to those with a salary of up to £40,000 living within a 15-mile radius of Cambridge who have saved for at least a year with the building society. For joint applicants, the salary cap will be £60,000.
Chief executive Stephen Mitcham revealed to the Cambridge Independent that the First Step Mortgage – the only one of its kind in the industry – is the first in a package of measures that the building society is lining up under the banner of ‘Making a difference’.
“We are a mutual business owned by our members,” he said. “We want to build on our roots and go out with housing-related initiatives that will be exclusive to The Cambridge.
“What we’re announcing under ‘Making a difference’ will be ring-fenced and only available in the local area. We are a business funded by the profits built up over the last 170 years. We’ve thought about how we make it clear to the community that there is a real benefit to having The Cambridge Building Society.
“Because of how high house prices are, it’s incredibly difficult to build up a deposit. We’ve identified that there are a whole group of people who don’t have the ‘bank of mum and dad’ behind them to help them.
“As a community-focussed organisation we recognise our responsibility to the people around us. Profit-making isn’t the objective of this product launch, we’re simply doing it to make it easier for people who need help the most to make that first step into home ownership.”
Some £5million has been set aside to fund the mortgage, which should enable about 20 first-time buyers to get a home. But more will be available providing The Cambridge continues its commercial success.
Stephen explained: “The board have agreed that each year, as we build on ‘Making a Difference’, we will allocate an agreed sum of profit for these initiatives. That amount will be released on the assumption that we make the agreed level of profit to make sure we can keep investing in the business and ensuring it is safe.
“We think that is a really strong message for the staff as well. We can make a difference. The people who are struggling to get a deposit now are often teachers, police and nurses: it’s a big change that we have seen.”
The mortgage is available at a two-year discounted rate of 3.24 per cent, no early repayment charges (ERC) and with unlimited overpayments allowed.
A two-year fixed rate of 3.49 per cent, with ERCs and limit of 10 per cent on overpayments, is also available, as is a five-year fixed rate of 3.94 per cent, also with ERCs and the same overpayment limit.
“Because it’s a higher-risk loan, if we were running this in a commercial way, we would load the interest rate. But we are not,” said Stephen.
“We are not aware of anyone else doing this. One or two offer 100 per cent mortgages but they are very heavily rate loaded.”
Unlike typical 100 per cent mortgage offers, no guarantor is required. The Cambridge will assess affordability for applicants.
“We still individually underwrite loans, so we have some flexibility. But we’re highly conscious that what we don’t want to do is put people in a position where they can’t afford the mortgage in two or three years’ time,” said Stephen.
A further home-ownership scheme will follow, Stephen confirmed, and The Cambridge will also extend its community work, which has included aiding homelessness charity Wintercomfort.
“We recognise we’re in a position to help some of society’s most vulnerable. We’re identifying charities and organisations to speak to but would welcome approaches from these groups,” said Stephen.
The Cambridge will also aid first-time buyers at a free event on Tuesday, October 2, at 6-7.45pm at The Cambridge Brew House on King Street, where mortgage advisers will guide prospective home owners through each step, and offer guidance on schemes like help to buy. Register at cambridgebs.co.uk/ftbevent to attend.
Earlier this year The Cambridge, formed in 1850, opened a flagship city centre store at 4 St Andrew’s Street – close to where its first branch stood.