Tipton Building Society launches first-time buyer mortgage where you only need a 1% deposit

How does Tipton's new 99% mortgage work?

The new mortgage is being marketed as 99% loan-to-value (LTV) as you can put down just a 1% deposit with Tipton offering you a loan for the rest - but there is a catch.

That's because Tipton requires 20% of the property price as security, which means parents or relatives will need to act as guarantors for the loan.

How this works is that you as the first-time buyer need to put down a deposit of between 1% and 10%, while the remaining 10% to 19% needs to be guaranteed by your family.

They can do this by either putting the cash into Tipton's Family Assist savings account or by securing the money against their own property as long as they own as least 40% of their home.

Minimum amounts lent are £75,000 outside of London's M25 and £250,000 within the M25.

The mortgage itself can run from five to 35 years and the 3.09% interest rate is fixed for five years until November 30, 2025. After this, it reverts to Tipton's standard variable rate (SVR), which is currently 4.94%.

There are no arrangement or booking fees to take out the mortgage and you can get it directly from Tipton or via a broker.

But bear in mind you will pay early repayment fees of 1% for each year remaining if you overpay more than 10% of the mortgage each year. Over payments of up to 10% won't incur a fee.

You also can't take the mortgage with you if you move house, and if you cancel it early you'll be charged £125.

Is Tipton's 100% mortgage better value?

With Tipton's existing Standard Family Assist mortgage you can borrow up to 100% of the property's value, which means you don't need to put down any deposit.

But here, your family will have to put down a larger 20% as security -whether that's in savings or by putting their own home up as collateral - as long as they own at least 40% of it.

Again, there's a minimum £75,000 mortgage outside of the M25 and a £250,000 minimum loan within the M25.

The rate is a higher 3.39%, which is currently discounted by 1.55% from Tipton's 4.94% SVR. But this is variable, which means it can change.

There are no booking, arrangement or early repayment fees.

You can't take the mortgage with you if you move house, but unlike the 99% deal there are no early exit fees. The mortgage itself can run from five to 35 years.

What are the pros and cons and is it a good deal?

Tipton's Flexible Assist 3.09% fixed rate is the only mortgage deal available at 99%, according to comparison site Moneyfacts.

But it points out that there are a number of deals at 100% with varying interest rates and terms.

Moneyfacts says the lowest rate currently offered at 100% is by Buckinghamshire Building Society at 2.74% for two years (4.74% after) with no fees, but this is only for those with ties to the area.

The lowest rate open to all is Barclays' 3.05% Springboard, which is fixed for five years with no fees. It reverts to the Bank of England base rate plus 3.49%, which is currently 3.59%, after.

Nick Morrey, product expert at broker John Charcol said: "Given the lack of 95% mortgages on the market right now, having another lender offer a Family Assist mortgage product is a very welcome addition.

"The Tipton five-year fixed rate is really quite competitive at 3.09% and good value for money given that normal 90% loan to value five-year fixed rates mortgages start from 3.24%."

If you do go for Tipton's offer, the most obvious point to watch out for is that your family member's cash or house is at risk if you fall behind on your repayments.

And their cash only becomes available, or the charge on their home lifted, once the first-time buyer has paid off enough of their mortgage to reduce it to 80% LTV.

The linked savings account also only pays 0.1% interest.

Of course, your own home can ultimately be repossessed too if you can't keep up with your mortgage.

You should always use a broker to compare deals first. Free brokers include London and Country and Trussle.

Eleanor Williams, personal finance expert at Moneyfacts added: “Not only is the mortgage market a changing landscape at the moment with products and criteria constantly updated, but speaking with a qualified, independent adviser may well be invaluable in navigating the various products available."

We round-up the best mortgages for first-time buyers.