A deposit-free mortgage aimed at helping renters get onto the property ladder has been launched.
Skipton Building Society said its "industry first" mortgage would help people get out of "trapped rental cycles". As well as no deposit, The Track Record Mortgage will not require a guarantor either.
Instead, tenants who can show they can afford the mortgage and a track record of paying rent can borrow up to 100pc of the value of a property on the five-year fixed rate mortgage. Skipton has warned it expects high demand and the deal "may sell out quickly", Wales Online reports.
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It said there were 4.6million households renting privately across England - more than double the number recorded in 2000. The building society said its own research showed how eight in ten tenants felt "trapped" in the rental cycle, paying rents that are higher than a mortgage which then prevents them saving a deposit to buy their own home.
At the same time, house prices for first time buyers have risen by an average of 18pc in the past two years, an increase of £39,680, it said.
Skipton said its new mortgage would "enable people trapped in these rental cycles who are prevented from saving for a house deposit, to access the property ladder and make a home their own". It added that, to ensure affordability, buyers would not be paying more on a monthly basis than what their current rent is.
Charlotte Harrison, CEO of home financing at Skipton, said: “We need to tackle the UK’s housing affordability crisis to enable more people, especially renters who are trapped in renting cycles, to buy their first home. People trapped in renting is one of the UK’s biggest housing challenges, having a massive impact on the fabric of our society. With escalating rents and the cost-of-living squeeze further impacting people’s ability to save for a house deposit – it’s making it almost impossible for people get onto the property ladder.
"We 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 so 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. It is time for a re-think on these massive barriers to home ownership, and we’re proud to take the lead on bringing to the market, solutions for such a massive social problem.
"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. In building our mortgage product with these challenges at the centre we’re ensuring considerations around negative equity have been fully taken into account.”
The deal offers a five-year fixed rate at 5.49pc and a maximum mortgage term of 35 years. Applicants can borrow between 95pc and 100pc of a property's value and must be aged 21 or over. It is only available to first time buyers.
Ms Harrison added: “We know there isn’t one quick solution to addressing this huge societal challenge of tenants being trapped in renting cycles, with rents escalating faster than mortgage payments and the increasing costs of living, but doing nothing isn’t going to solve this UK housing issue.
"As a responsible lender, we need to be sensible with our approach for bringing this product to the market and ensure tenants don’t take on more than they can realistically afford. We know this product will not be able to help everyone and is only part of the solution for this group of people, but as a lender, we’re taking a stand to offer innovation in this space to help turn generation rent into generation buy.”
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