It is available to renters who have no missed payments on debts or credit commitments
Skipton Building Society has launched a 100% loan-to-value (LTV) track record mortgage, which aims to help renters get on the property ladder without making a deposit.
The five-year fixed rate product is available at 5.49% with a maximum term of 35 years at between 95 to 100% LTV.
A buyer might be eligible for this mortgage if the applicant is a first-time buyer, aged 21 or over, has less than a 5% deposit, and has no missed payments on debts or credit commitments over the previous six months.
The applicant can potentially borrow up to £600,000 if they meet the household-to-household criteria, are not looking to buy a new build flat, and has proof of having paid at least 12 months’ rent in a row during the last 18 months.
“People trapped in renting is one of the UK’s biggest housing challenges, having a massive impact on the fabric of our society,” Charlotte Harrison (pictured), chief executive of home financing at Skipton Building Society, said in an article announcing the new product. “With escalating rents and the cost-of-living squeeze further impacting people’s ability to save for a house deposit – it’s making it almost impossible for people get onto the property ladder.
“We recognise there’s a clear gap in the market for people who have a strong history of making rental payments over a period of time and can evidence affordability - but there is currently no solution for them to buy a property due to lack of savings or access to family wealth. It is time for a re-think on these massive barriers to home ownership, and we’re proud to take the lead on bringing to the market, solutions for such a massive social problem.
“We know there isn’t one quick solution to addressing this huge societal challenge of tenants being trapped in renting cycles, with rents escalating faster than mortgage payments and the increasing costs of living but doing nothing isn’t going to solve this UK housing issue.”
Harrison added that as a responsible lender, Skipton needed to be sensible in its approach for bringing the product to the market, ensuring tenants didn’t take on more than they could realistically afford.
“We will also accept applicants who have a small deposit,” she said. “We know this product will not be able to help everyone and is only part of the solution for this group of people, but as a lender, we’re taking a stand to offer innovation in this space to help turn generation rent into generation buy.
‘Brave move by Skipton’
Samuel Mather-Holgate, independent financial advisor at Mather and Murray Financial, called Skipton’s launch of 100% LTV track record mortgage “a brave move by a lender as the housing market was on shaky ground.”
“With a gap in the market, not being serviced by anyone else, this could pay off,” he said. “Rates are competitive, and if inflation falls away, the economy could shore up and the housing market rise next year, ensuring equity in the properties and reducing their risk.
“It’s not clear yet just how squeaky clean your credit score needs to be to get one of these mortgages, but it’s likely that Skipton will be super-selective.”
Brian Murphy, head of lending at Mortgage Advice Bureau, believed that 100% mortgages would drive the market forward and was a positive sign of things to come.
“It’s this innovation that will herald a new era for the property market: one that removes hurdles and creates opportunities,” he said. “For thousands of first-time buyers who have historically been unable to buy despite paying rent that could potentially be more than mortgage payments, it unlocks the potential of home ownership and recognises that rental payments have a role to play – something that has long been a sticking point.”
David Hollingworth, associate director for communications at L&C Mortgages, added that Skipton’s tracker record mortgage deal recognised the fact that hard-pressed first-time buyers that have met their rent and household bills over a sustained period of time should demonstrate their ability to meet a mortgage payment lower than their rent, irrespective of the existence of a deposit.
“It won’t solve all the difficulties for all first-time buyers, and there will be affordability limitations on the borrowing amount, which may still not meet the required purchase price,” he commented. “However, it offers a measured approach that gives credit for the fact that many tenants will have built up a strong track record of managing their housing costs responsibly.
“There will always be concerns that no deposit could risk negative equity, but this is a longer term product for that reason, and if it can help some accelerate the move from renting to home ownership, it could be a significant new product.”
Nigel Purves, meanwhile, reminded those considering such a product to fully understand the approval process that they will be subject to.
“While the concept of purchasing a home without a deposit is attractive, the income multiplier associated with mortgages would still limit the purchasing power of those with lower incomes,” Purves pointed out. “What’s more, there’s a very real risk of buyers falling into negative equity should property values start to fall.
“Given the unsettled market conditions seen in recent months, such a change in the market is far from out of the question and could see buyers lumbered with their property and unable to remortgage until such a time that market values recover.
“Rather than loading people up with more debt and negative equity risk, those who are truly serious about solving the housing crisis should be looking at alternative approaches that can solve the problem in a sustainable way that is accessible to more people.”
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