In an exclusive for the rental sector, leading lender Skipton Building Society announced plans to launch a 100% mortgage this month. The initiative is the first no-deposit deal — that doesn’t require the backing of a guarantor — to launch in the UK since the 2008 financial crisis, and is set to help first-time buyers who are struggling to save for a deposit to step onto the property ladder.
In the case of Holmfirth —where the average rental value sits at around £700 per month —a borrower could potentially use this amount to cover the mortgage payments on a two to three bedroom property, assuming they are able to secure the loan. This should make the transition from renting to homeownership much easier, removing the stumbling block of saving for a deposit or relying on the financial support of family and friends.
Amy Wray, managing director at Applegate Properties, praised the solution: "As someone who rented for over 10 years myself, with no option to save for a mortgage at the time, I really support the inclusivity of the product.
“It’s a little bit like old fashioned lending, with Skipton Building Society stating you can only borrow the equivalent of your monthly rental payments per month, as you have demonstrated an ability to pay these on time with no issue — a common sense approach really. Applicants do have to be over 21 years old though, rather than the customary 18.”
However, it's important to note that Skipton's 100% mortgage product does come with certain risks, such as the potential for borrowers to struggle with repayments if property prices fall, and the need for additional insurance to protect the lender in case of default.
The interest rate on a five-year fix is also 5.49%, which is quite a premium to pay for not having a deposit. Pulling together 5% of the total property price and taking out a 95% loan-to-value (LTV) instead could see a much more affordable repayment, if possible.
As with any financial decision, potential borrowers should carefully consider their options and seek professional advice before committing to a deal.
As a Holmfirth-based specialist estate agent, Applegate Properties is one of the few local firms accredited by both ARLA and NAEA — as seen on the Propertymark website — and boasts access to an independent mortgage advisor too. As such, our team is perfectly placed to offer guidance on the intricacies of this emerging update.
Applegate Properties’ independent advisor, Samuel Bull, concluded: "We’ve been waiting for this product, ‘The Track Record Mortgage’, to land for a while. It’s a great option for those who have been renting for years, and ultimately paying someone else’s mortgage without being able to save up at the same time. So many tenants pay their rent, utilities, and other bills without delay, and it's great that Skipton Building Society is recognising this and giving them a purchase option.
“There are some caveats, as each tenant must be able to exemplify A-paid credit and rent. They can demonstrate their rental outgoings via bank statements or by confirmation from an ARLA-licensed agent. Applegate is one of the few Holmfirth agents who meet this criteria.”
Who is eligible for Skipton’s 100% mortgage?
To apply for the scheme, borrowers must:
Be a first-time buyer
Be aged 21 or over
Have a deposit less than 5% of the purchase price
Have no missed payments on debts or credit commitments in the last six months
Be looking to borrow up to £600,000, with a maximum 4.49x loan-to-income (LTI) over a repayment term no longer than 35 years
Be seeking a property with a monthly mortgage payment lower than or equal to the average of the last six months of rental cost
Meet the household-to-household criteria
Not be searching for a new build flat
Have proof of having paid rent for at least 12 months in a row, within the last 18 months
Have 12 months of experience paying all household bills within the last 18 months.
Applicants will also have to pass affordability and credit checks as standard, before being approved for the mortgage.