Skipton launches 100% mortgage to help renters onto the property ladder

Skipton Building Society has launched a 100 per cent mortgage for tenants, enabling them to move up the real estate ladder with no down payment.

The five-year fixed deal comes with a rate of 5.49 percent and a maximum term of 35 years.

It comes after This is Money was revealed in an exclusive interview in early April with Stuart Haire, CEO of Skipton, planning to help first-time buyers facing a huge hurdle in saving for a down payment on a house.

The mortgage is open to all first-time buyers who are currently renting and meet the lender’s affordability criteria, allowing them to borrow up to 100 percent of the property’s value.

Charlotte Harrison, from Skipton, said: ‘People being locked into renting is one of the biggest housing challenges in the UK, with a huge impact on the fabric of our society.

“With escalating rents and cost-of-living pressures further eroding people’s ability to save for a home security, it’s becoming nearly impossible for people to move up the property ladder.

“We recognize that there is a clear gap in the market for people who have a strong history of paying rent over a period of time and who can demonstrate that a mortgage is affordable – but there is currently no solution for them to get a buying a home because of a lack of savings or access to family wealth.

“It is time to rethink these massive barriers to homeownership, and we are proud to be at the forefront of bringing solutions to market for such a huge societal problem.”

Harrison adds that the Track Record Mortgage product was created with potential risks in mind, including negative equity concerns.

When news of a 100 deposit-free mortgage first broke last month, many expressed concern that borrowers would risk falling into negative equity – where the value of the loan exceeds the property.

First-time buyers on the housing market are currently faced with several factors that make it difficult to climb the housing ladder.

Higher mortgage rates following the rising cost of borrowing last year, coupled with stubbornly high home prices, are making it difficult for potential buyers to make a down payment and meet lenders’ affordability criteria.

According to Skipton, there are 4.6 million privately rented households across England, more than double the number recorded in 2000.

Within that, four in five renters feel ‘trapped’ in the rental cycle, paying rents higher than a mortgage, preventing them from making a down payment to buy their own home.

At the same time, first-time home prices have risen by an average of 18 per cent over the past two years, an increase of £39,680.

More than a third of renters say higher monthly payments keep them from saving for a home security deposit.

Nearly a third of renters spend at least half of their income on housing, compared to just 17 percent of mortgage holders, according to a survey by Ipsos.

David Hollingworth, from L&C Mortgages, said: ‘Talking about 100 per cent mortgages may feel like something of a throwback to the future moment, but it’s a very different climate to when they were widely available on the market.

“This deal recognizes the fact that struggling first-time buyers who have paid their rent and household bills over an extended period of time must demonstrate their ability to meet a mortgage payment that is less than their rent, regardless of existence.” of a down payment.

It won’t solve all problems for all first-time buyers and there will be affordability restrictions on the loan amount that may still not meet the required purchase price.

“However, it offers a considered approach that recognizes the fact that many tenants have built a strong track record of responsibly managing their housing costs.

“There will always be concerns that no down payment could create a risk of negative equity, but for that reason this is a longer term product and if it can help accelerate the transition from renting to homeownership it could be an important new product.’

All applicants for the Skipton mortgage must be able to provide a credit score plus proof of a minimum of 12 months of good rental history.

For example, based on the average rent of £1,290 per month, an applicant could borrow up to £240,509 on a 100 per cent mortgage at 5.49 per cent interest over 35 years.

Skipton is Britain’s fourth largest mutual. It says it ensures that the monthly mortgage payment for each applicant is no more than the average of the rent they’ve paid over the past six months.

For example, a tenant who pays an average of £800 per month for the past six months has a maximum monthly mortgage payment of £800.

There are 15 other 100 percent mortgages available according to Moneyfacts – however, all of these have a guarantor requirement – usually family or friends.