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UK lender launches 100% loan-to-value, deposit-free mortgage aimed at renters

Nick Cheek
Written By:
Nick Cheek
Posted:
Updated:
09/05/2023

Skipton Building Society has launched a 100% loan to value (LTV) aimed at helping renters get onto the property ladder without the Bank of Mum and Dad or guarantors.

This is the first 100% deposit-free mortgage launched onto the market for 15 years. The Building Society hopes that the new product will help to “tackle the UK’s housing affordability crisis” and help those renters “trapped in renting cycles, to buy their first home”.

Why is the 100% mortgage back?

Charlotte Harrison,  CEO of home financing at Skipton, said there was a “clear gap in the market” for people with a strong rental payment history and who could evidence affordability of a mortgage, but there were currently no solutions for them to buy a property due to a lack of savings or access to family wealth.

She added: “This is why we’re introducing our track record mortgage. It has been carefully created with the challenges generation rent is facing in mind, together with the potential risks and challenges they may encounter in the future too.”

How does it work?

The track record mortgage, comes with a five-year fixed-rate term starting at 5.49% over a maximum term of 35 years. The product is eligible for tenants aged 21 and over and first-time buyer purchases only.

It has a maximum loan size of £600,000, and applicants can have no missed payments on debts or credit commitments in the last six months.

It comes with no fees, and is subject to affordability and credit score as well as evidence of 12 months of good track record of rental history.

The lender added that it would ensure monthly mortgage payments for each applicant is not more than the average of their last six months rental costs they have paid.

For example, if a tenant has paid £800 per month over the last six months, then their maximum mortgage payment will be £800.

New build flats are not eligible for the product.

Skipton Building Society said that the average rent in Great Britain was £1,290, so with an applicant borrowing a 100% LTV mortgage with an interest rate of 5.49% over 35-year mortgage term it could lend up to £240,509. This would equate to £1,290 per month in mortgage payments.

What do the experts think?

Financial experts welcomed the return of the 100% deal, noting that it should help turn renters into buyers.

Karen Noye, mortgage expert at Quilter, said: “This is the first time a product like this has been on the market since the financial crash and should help those trapped renting find properties even if they don’t have a deposit.”

Meanwhile, Andrew Montlake, managing director of mortgage broker Coreco, said that in current era the “gap between the haves and the have-nots is increasing, especially when it comes to getting onto the housing ladder”.

He continued: “There are many potential buyers who have proved they can afford to pay rent at the current high levels, but just do not have the means to meet ever increasing deposit levels and feel constantly at the mercy of rising rents.

“Whilst I have had some concerns in the past, the time now seems right for a new type of 100% LTV mortgage, one that is underwritten prudently and where affordability is carefully taken into account. The Skipton product is different to those of yester-year, as it is linked to the rent currently being paid and the mortgage payment cannot be more than the average of the borrowers last six months rent.”