Yorkshire Building Society will become the first lender to relaunch 95% mortgages in the mainstream market, nearly a year after the pandemic spooked lenders into withdrawing low-deposit home loans. However, the deal will only be available to first-time buyers and the society will apply strict conditions on lending, including ruling out flats and new-build homes. The recent budget brought news of a government guarantee scheme to encourage banks and building societies back into the low-deposit mortgage market, in a move the chancellor said was designed to help generation rent become “generation buy”. Although the society is not planning to use the scheme, it said it would not have returned to the market without it, because of the anticipated demand from would-be homeowners. Last year, together with the handful of other lenders operating in the 90% mortgage market it was forced to place restrictions on applications to manage demand, and on several occasions offered the loans for just two days at a time. Yorkshire’s 95% deal, which will be offered through mortgage brokers, will have a rate of 3.99% fixed for five years, and comes with a £995 fee. Yorkshire Building Society’s chief executive, Mike Regnier, said he was confident the lender could shoulder the risk itself, without needing to fall back on government money. But he said it would not have re-introduced its own low deposit mortgage unless it knew other major banks were about to join the 95% market through the government scheme. “As the only lender in this market we’d struggle to meet the demand that clearly is out there for customers that have saved for years to get a 5% deposit, and will want to take every advantage of the stamp duty land tax holiday,” Regnier said. The society has more than 200 underwriters poised for the launch. The mortgages will not be available to borrowers hoping to buy flats or new-build houses, which can be more vulnerable to price falls during economic downturns. It is not planning to restrict applications to certain days or time slots, but its strict criteria – which also exclude furloughed workers – is meant to reduce demand. “We’re trying to restrict, to an extent, the amount of demand that we get from it so that we can manage our service levels. We’ve done that very deliberately,” Regnier said. The Covid pandemic led to most lenders pulling their 95% mortgages last spring. Currently, there are only five 95% loan-to-value (LTV) mortgage products available compared with 391 in March 2020, and those are specialist deals, according to the financial data provider Moneyfacts. But in an effort to kickstart the low-deposit mortgage market, Rishi Sunak announced a government-backed guarantee scheme for lenders. The scheme, which can be used for home loans given to remortgagors and movers as well as first-time buyers, compensates the bank or building society for some of the money lost if a borrower defaults and the property is repossessed. A number of mainstream lenders have already committed to the scheme, including Lloyds, NatWest, Santander, Barclays and HSBC. The scheme, which will run until 2022, will be restricted to properties worth up to £600,000.