Skipton Building Society confirmed yesterday that it has launched a deposit-free mortgage specifically aimed at people currently renting.
Skipton’s product, available at a borrowing rate of 5.49%, is likely to prove popular as the deal requires 12 months of on-time rental payments and a good credit history, but not a guarantor – unlike other similar deals.
The Skipton, which is the UK’s fourth biggest building society, says it recognised a “gap in the market”.
Stuart Haire, the society’s chief executive, told the press the “until now there has been no solution for them [renters] to buy a property due to a lack of savings or access to family wealth”.
The introduction of the 100% mortgage product has been broadly welcomed.
Danny Belton, head of lender relationships at Legal & General Mortgage Club, commented: “In a property sector that is sorely in need of innovative product offerings for renters, Skipton Building Society’s new product is a welcome step in the right direction.
“A product that supports those with a strong history of rental payments, and those who have paid household bills over a prolonged period of time, is exactly the kind of innovative offering the market needs to help people make the transition from renting to buying. Many buyers have already proved their ability to pay high monthly rental payments, and it’s encouraging that a lender is now recognising this in its criteria requirements.”
Adrian Anderson, director of property finance specialists, Anderson Harris, said: “With the news of Skipton Building Society launching a 100% mortgage, a first for lenders in 15 years, it seems that the humble building society is leading the way in helping would-be homeowners.
“For renters wanting to get onto the property ladder with good credit history and a 12-month track record of meeting rental payments on time, this is potentially welcome news. This new product removes the stumbling block of saving for a deposit and the ever-growing reliance on the Bank of Mum and Dad to facilitate home ownership. We have already taken a number of calls today from interested first-time buyers.”
Kate Anderson, deputy editor of personal finance comparison site, finder.com, commented: “The idea of the 100% mortgage making a comeback will raise a red flag for many, but for others it’s the lifeline they’ve been looking for. No one wants to return to the risky lending practices that preceded the 2008 financial crisis, but Skipton has made it clear that applicants will need a good credit history.
“As long as lenders continue to do their due diligence and have strict lending criteria in place, then this type of product could prove to be very popular. It could also go some way to actually helping those stuck in the rental cycle.”
Rob Houghton, CEO of reallymoving, said: “For a lot of people who don’t have the means to save whilst paying record high rents, and who aren’t lucky enough to receive gifts of large sums from family members, home ownership feels like a pipe dream. For years, responsible renters have been calling for their payment history to be taken into account, and if they can show that over time they’ve had no issues affording rent which is at least as high, if not higher, than their mortgage repayment would be, that should provide reassurance to lenders.”
But the co-founder and CEO of Wayhome, Nigel Purves, has expressed concern at the introduction of the new 100% product.
He commented: “Although the re-introduction of 100% mortgages will no doubt be welcomed by those struggling with the high cost of homeownership, it’s important that anyone considering such a product fully understands the approval process they will be subject to.
“While the concept of purchasing a home without a deposit is attractive, the income multiplier associated with mortgages would still limit the purchasing power of those with lower incomes.
“What’s more, there’s a very real risk of buyers falling into negative equity should property values start to fall. Given the unsettled market conditions seen in recent months, such a change in the market is far from out of the question and could see buyers lumbered with their property and unable to remortgage until such a time that market values recover.
“Rather than loading people up with more debt and negative equity risk, those who are truly serious about solving the housing crisis should be looking at alternative approaches that can solve the problem in a sustainable way that is accessible to more people.”
Lenders set to bring back 100% mortgages
