A new deposit-free mortgage scheme has been launched specifically for people currently renting, to try to help more people get on the property ladder.
Skipton Building Society will begin offering 100 per cent mortgages, meaning first-time buyers won’t need a deposit to buy a house.
It comes amid rising house prices and with the cost-of-living crisis further hindering renter’s ability to save for a deposit.
Here’s everything you need to know.
What is the mortgage-free deposit scheme?
The new five-year fixed-rate mortgage from Skipton Building Society does not require a guarantor and is only for people renting a property.
But the interest rate of 5.49 per cent is more expensive than the average five-year fix of five per cent.
The Skipton is the UK’s fourth biggest building society and said it recognised a “gap in the market”.
The lender said it expects demand for this product to soar and warned that it may sell out quickly.
Named the “track record mortgage,” interest on the product will sit at 5.49 per cent over a maximum term of 35 years.
It’s the first 100 per cent mortgage to return to the market for a while, but some have warned that borrowers should be careful and aware of the risk of negative equity.
But Skipton’s chief executive of home financing, Charlotte Harrison, said it is aimed at first-time buyers who do not benefit from family wealth or savings.
She said: “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.
“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 to get on to the property ladder.”
Who is eligible?
Applicants need 12 consecutive months of good rental history, and to pass credit and affordability checks, which rules out a lot of people with CCJs or poor credit ratings.
Borrowers will be able to choose between a 100 per cent and 95 per cent loan-to-value.
Skipton also says the monthly mortgage repayment will not exceed the borrower’s last six months of rental costs.
For example, a tenant whose rental payments have been £800 per month over the past six months will have a maximum monthly mortgage payment of £800.
Research from Skipton shows that eight in 10 tenants feel “trapped” in the rental cycle, paying rents that are higher than a mortgage, which is limiting their ability to save a deposit to buy their own home.
Meanwhile, house prices for first-time buyers have increased by approximately 18 per cent in the past two years.
