According to a report from home ownership group Wayhome, which surveyed around 1,119 first-time buyers, around 26% would consider a 100% LTV mortgage, requiring no deposit. This is compared to 74% of those surveyed who said they would not.

When asked if first-time buyers would be prepared to pay a higher monthly repayment to secure a zero deposit mortgage, the figure fell further with only 21% saying they would.

First-time buyers pay more for a zero deposot loan

Only 28% said they were aware of how much more a zero deposit mortgage could cost each month.

Figures from Octane Capital show that, based on the current first-time buyer house price of £238,742 in Britain, Skipton’s new zero deposit product would cost around £1,465 per month, or £1,092 for an interest-only payment. This is based on the cited product rate of 5.49%.

This compares to a loan of £202,931 at 85% LTV with an average rate of 4.2%, which would cost around £1,096 per month, or £714 for an interest-only payment.

Therefore, first-time buyers would pay around £4,425 more over the space of the year for Skipton’s no deposit product.

Negative equity risk

In addition, most first-time buyers, 64%, said they were not aware of the risk of negative equity with such a product, which occurs when the value of the property becomes worth less than the remaining value of your mortgage.

When first-time buyers were asked what the most significant obstacle they faced was, the top factor was finding an affordable home in an area they wanted to live in.

This was followed by the cost of a deposit, ongoing monthly cost of a mortgage, current income not being sufficient for a mortgage and inadequate credit score for a mortgage.

First-time buyers need to be ‘fully aware’ before ‘taking the plunge’

The survey comes after Skipton Building Society launched its zero deposit track record mortgage product.

Brokers broadly welcomed the move, noting that it could help Generation Rent get onto the property ladder. However, some warned of the dangers of negative equity, as house prices are expected to fall in the near term.

Wayhome’s co-founder and CEO Nigel Purves said: “With interest rates climbing and house prices remaining at record highs, the nation’s beleaguered first-time buyers will no doubt be jumping for joy at the prospect of a 100 per cent LTV mortgage.

“However, the devil is very much in the details and those considering one should be fully aware of just what they are signing up for before taking the plunge.”