100% mortgage product to help renters with no deposit

Skipton Building Society has launched a five-year fixed deal at a 5.49% rate with a maximum term of 35 years for tenants who can borrow up to 4.49 times their income up to a maximum of £600,000 to enable them to get onto the property ladder without a deposit.

Family bringing boxes into the house

The mortgage is open to all first-time buyers who currently rent and pass the lender's affordability criteria including demonstrating a credit score and providing evidence of a minimum of a 12-month good track record rental history, which will then allow them to borrow up to 100 per cent of the value of the property.

According to the financial information company, Moneyfacts Group, there are 15 other 100% mortgages available, however, they all come with a requirement of having a guarantor. 

There will always be concerns that no deposit could risk negative equity, but this is a longer-term product for that reason to help some buyers accelerate the move from renting to home ownership.

Charlotte Harrison, from Skipton Building Society, stated they 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 of a mortgage – but there is currently no solution for them to buy a property due to lack of savings or access to family wealth.

Increased costs

With the cost-of-living issues, mortgage rates have risen, and with an increase in property prices over the last two years, it is hard for first-time buyers to gather a deposit and meet lenders' affordability criteria.

Statistics show that there are 4.6 million households renting privately across England and within this, four in five tenants are in a rental cycle, paying rents that are higher than a mortgage which then prevents saving for a deposit to buy a home. Nearly a third of renters spend at least half of their income on housing compared to just 17 per cent of mortgage holders.

The affordability checks require 12 months of bank statements to be provided. Where this can't be given, a letter from an ARLA Propertymark letting agent, detailing the 12 monthly rent payments must be provided.

Help to buy schemes

With no scheme currently available for first-time buyers in England (the latest one closed in 2022) it has been virtually impossible to get onto the property ladder without a minimum of a 5% deposit. A comprehensive review of the mortgage market was commissioned by the UK Government in June 2022, with a promised report in Autumn 2022, however, nothing has been forthcoming.

The Welsh Help to Buy Scheme was extended in Wales for two years and the Welsh Government introduced a new price cap of £300,000 from April 2023, in line with increases in average house prices in Wales.