100% Mortgage: Skipton Building Society launches new 100 percent mortgage for renters in the UK.

100% Mortgages are an option again

In what some are calling a ‘revolutionary’ move, The Skipton Building Society has launched a new 100 percent mortgage specifically aimed at renters, who are also first time buyers, in order to escape sky-high rental payments and get onto the property ladder. 

Why were 100% Mortgages removed from the market?

The last 100% mortgage was canned back in 2008, following the 2007-2008 financial crisis and recession. In the years up to 2006, cheap credit and relaxed lending had become commonplace. At this time, some subprime lenders began to go into administration, the most well-known of these, British mortgage lender, Northern Rock, turned to the Bank of England and was eventually nationalised. This was swiftly followed by the collapse of Lehman Brothers, a global financial services company, which went bankrupt in September 2008. Never again would subprime lending and all of the associated mortgage products be made available, and various measures were introduced to mitigate against such risks.

Against this backdrop, it may be surprising that this new mortgage product has been launched, however this new offering from The Skipton Building Society is quite a different proposition to the 100% mortgages of 2006 and they have ensured that there are several measures in place which make it a more responsible lending option.

What is Skipton’s 100% mortgage for renters?

The new mortgage launched for tenants, is called a ‘Track Record Mortgage’. The Track Record Mortgage will enable current renters to purchase a property with no deposit and 100% Loan to Value (LTV). This negates the need for borrowing from parents, guarantors or buying with friends.

Who is the 100% mortgage for?

The Track Record 100 percent mortgage is only for customers who are currently renting and are aged 21 and over. They must also provide evidence of a minimum of 12 months rental payments with no defaults. Most importantly they must be first time buyers as this is only available on first time buyer purchases.

How does it work/what type of mortgage is it?

The Track Record Mortgage is a 5-year fixed rate product  which is offered at a rate of 5.49% over a maximum term of 35 years. Tenants are able to borrow over 95% up to 100% loan to value.

In order to mitigate against some of the risks, Skipton will ensure that the monthly mortgage payment for every new applicant is not more than the average of their last six months rental payments. For example, a renter who pays an average of £1,000 per month over the last six months will have a maximum monthly mortgage payment of £1,000. New applicants will be able to borrow up to a maximum value of £600,000 in order to purchase their first home.

Like any other mortgage, the applicant will be subject to the usual affordability and credit history checks as per their standard procedure.

Is negative equity an issue?

It may concern you if UK house prices fall. However, the longer term nature of the Track Record 100 percent mortgage may help to lower the risk to the tenant brought on by short-term fluctuations in house prices.

Why has Skipton launched this new mortgage now? 

Many pressures such as sky high rents, rising house prices – they have risen by 18% in the last two years – plus the nagging and ongoing ‘cost of living’ crisis have all created a perfect storm for young renters, many of whom cannot afford to save for a deposit alongside making their monthly rental payments. Whilst accidental, private landlords are being squeezed by increased regulation and removal of various tax breaks, it seems that these increased costs are being passed down the line to the rental generation.

Managing Director, Max Mace, comments; ‘It’s refreshing to see a lender like Skipton proactively reacting to what is going on in the property market and launching a new mortgage which can assist more people onto the property ladder, amidst what has been a turbulent financial time for many would-be first time buyers’, he continues, ‘as with any mortgage we recommend, we would always carry out a full fact find, as well as affordability assessments to ensure that we are offering the best advice, suitable to each borrower’s individual situation’. 

‘We will be interested to see if any other lenders follow in Skipton’s footsteps and launch other innovative mortgage products which could help to address some of the issues faced by borrowers currently across the UK’.