Lenders are about to pay back 100 percent of mortgages for the first time since the 2008 financial crisis
Lenders are about to offer 100 percent mortgages for the first time since the 2008 global financial crisis.
Skipton Building Society plans to launch a loan for first-time buyers who don’t have a down payment to get more people up the real estate ladder.
Chief executive Stuart Haire said the society wanted the new mortgage to “help those trapped in rents.”
The exact details of the loan are still a secret, but borrowers must be able to demonstrate a history of paying rent at a level similar to a mortgage payment for up to two years.
The deal is locked in for two years to prevent them from going into negative equity – where a property is worth less than the value of the mortgage taken out to buy it.
Lenders are about to issue 100 percent mortgages that allow first-time buyers to borrow the full cost of a home without putting down a down payment
Major banks, including HSBC, all previously offered no-down mortgages prior to 2008
Mr Haire did not confirm whether the mortgage would be up to 100 per cent of a property’s value, but told The Times Skipton was trying to find a way around the roadblock faced by first-time buyers who pay rent regularly but cannot get rent . a mortgage due to not being able to save for a 5 percent down payment.
But some analysts have warned that the yield of a 100 percent mortgage will put borrowers at greater risk of negative equity if the value of their home falls by just 3.7 percent in two years.
Before the financial crash of 2008, all major lenders, including Lloyds and HSBC, offered no-down mortgages.
These loans were banned from the market after the crisis amid a crackdown on risky loans.
But the lack of affordable mortgage options for first-time buyers has increased their appeal amid the government’s panic that its plans to boost homeownership are under threat.
In an effort to increase purchasing power, the government may be considering a revival of the Help to Buy scheme, which offered first-time buyers loans for new-build homes.
The push to make mortgages more affordable comes on the back of expectations that the Bank of England will raise interest rates again this week, adding pressure on borrowers as repayment costs rise.
The bank is expected to raise interest rates by 0.25 percentage point to 4.5 percent, the highest level since October 2008.
And they fear rates could hit 5 percent in December.