Martin Lewis has given his verdict on a new mortgage product that doesn’t require a deposit or guarantor.
Skipton Building Society is launching its new Track Record Mortgage for renters who are struggling to save a deposit for their first home.
Borrowers will need to show 12 months of on-time rent payments and a good credit history to be approved for a five-year fixed deal.
It’s the first deal of its kind since 2008, when lax affordability checks and high loan to value mortgages were largely blamed for causing the financial crash.
In a new post on the MoneySavingExpert.com website, Martin Lewis says he has “mixed feelings” about the new product but said it could be a “sensible” option for some renters.
He said: "Having campaigned for years to try and help mortgage prisoners locked in at hideous unaffordable rates – the spectre of 100% mortgages returning leaves me with mixed feelings.
"Years of property-porn TV shows have spouted the idea that you must buy a house as soon as possible, as big as possible – actually, the real priority is not to over-stretch your finances.
“Before the 2007 financial crash banks would simply throw mortgage loans out to anyone walking past a branch window; now we need to be more careful.
"So Skipton Building Society's criteria of requiring a good rental track record to prove someone can make mortgage payments is sensible, and so I cautiously welcome it, done carefully after advice, as an option for some."
MSE has also rounded up key features you need to know about this mortgage product, known as a 100% mortgage.
Only renters and first-time buyers aged 21 and over will be able to apply for this deal, as it is designed to help people get on the housing ladder.
You can only borrow the equivalent of, or less than, what you pay on rent each month - which may limit some people.
So for example, if you pay £1,000 a month in rent, you might be able to borrow £163,000, depending on affordability checks.
In comparison, the average first-time buyer property costs £238,000, according to the latest UK House Price Index.
Normally when you apply for a mortgage, the maximum amount you can borrow is based on your income - typically 4.5 times your salary - and outgoings.
The rate on the Track Record Mortgage is 5.49% fixed for five-years - but there are cheaper deals elsewhere if you can save up even a small deposit.
MSE explains that if you could pull together a 5% deposit, there are five-year fixes from 4.6% with a £300 set-up fee.
This is based on a £300,000 property.
Finally, MSE has warned that 100% mortgages also come with a greater risk of negative equity if house prices drop.
This is where the value of your mortgage becomes more than the value of your property.
