Experts discuss their return
Deposit free mortgage products were once a popular option among consumers, helping them gain access to the housing ladder.
However, following the financial crash this product type largely disappeared, until recently when Skipton Building Society launched an offering which allows borrowers to bypass standard deposit requirements by using their rental payment history.
The launch has been met with positivity among the housing industry, with experts claiming the product will help an increasing number of renters access the property ladder who may have not been able to do so without this support.
A good idea?
Karl Wilkinson (pictured left), chief executive of Access Financial Services, said the return of deposit free mortgages is a good idea, as it will help more renters get on the property ladder without the burden of saving.
Wilkinson added that this is particularly important at present, considering the increasing cost-of-living and rising rental prices.
“If you compare some of the high monthly rents with mortgage payments, it could help add a little more to household budgets,” he said.
Roxana Mohammadian-Molina (pictured right), chief strategy officer at Blend Network, added that two mortgage lenders have announced over the past two weeks that they will be offering 100% loan-to-value (LTV) mortgages on first-time buyer purchases. She believes that this is a clear sign lenders see confidence in future price and rate movement within the mortgage market.
“The developers and brokers we speak to are also seeing a pick-up in activity; we at Blend have seen a 30% to 40% increase in enquiries over the past two to three weeks,” she said.
Chain reaction
Following the launch by Skipton Building Society, Wilkinson believes that other lenders will gradually follow suit.
“Generally, once a product trend starts, others lenders will introduce products of their own to meet demand,” he said.
Wilkinson said as far as the potential impact, it will certainly help first-time buyers, and he added that there will undoubtedly be an increase in demand, which could lead to an increase in list prices. On top of this, Wilkinson said there could also be an impact on landlords that are considering downsizing their portfolio or leaving the market.
“I can see some landlords considering their options and even offering their properties to their tenants to ease their own situation,” he said.
Impact of return to deposit free products
Mohammadian-Molina said that if 100% LTV products were to return to the mainstream, then she expects them to come in the form of guarantor mortgages, family deposit mortgages and family offset mortgages.
“The return of deposit free products to the mainstream would be a great sign that positivity and confidence is returning to the market, and that lenders see confidence in future price and rate movement,” she said.
Do you believe the return of deposit free mortgages is a good idea for the mortgage market? Let us know in the comment section below.
