Zero-deposit mortgage launched for aspiring first-time buyers who are renting

Aspiring homeowners without savings or financial support from their family may be able to get onto the housing ladder without paying a deposit with a new mortgage offer.

Skipton Building Society has introduced a new “track record” mortgage available to first-time buyers who have a strong history of paying their rent, but have been unable to save up for a deposit to buy their first home. Tenants aged 21 and over may be able to take out mortgages at between 95% and 100% of the value of the property they have their eye on.

Anyone who hopes to secure the mortgage will need to provide evidence of at least 12 months of rental history, as well as passing affordability and credit checks, and it will be available to those looking to borrow up to £600,000, PA reports. Experts have expressed hope that the deal will help make it more attainable for renters to buy property, although some have pointed out that affordable housing is difficult to find amid the cost of living crisis.

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David Hollingworth, an associate director at broker L&C Mortgages, said: “Skipton’s track record mortgage is attempting to serve a part of the market that has recently been wholly reliant on help from ‘the bank of mum and dad’. Renters will have been frustrated by the need to build a big deposit to meet high purchase prices, whilst covering steep rental payments at the same time.”

But he added: “It won’t solve all the difficulties for all first-time buyers and there will be affordability limitations on the borrowing amount which may still not meet the required purchase price.”

Skipton’s terms and conditions for the new mortgage state that the building society will not lend on new-build flats, which is defined as ones that are being sold for occupation for the first time which have been newly built or converted within the past three calendar years. It also said the track record mortgage cannot be used with any other borrowing scheme.

Skipton also said it will be ensuring, when looking at affordability, that buyers will not be paying more on a monthly basis than their current rent – so a tenant paying an average of £800 per month over the past six months will have a maximum monthly mortgage payment of £800, for example. The offer comes with a five-year-fixed-rate of 5.49%, and the maximum mortgage term is 35 years.

Rachel Springall, a finance expert at financial information website Moneyfacts, said: “It is great to see more support for first-time buyers who are struggling to afford a deposit for a mortgage. There are very few 100% LTV mortgages in the market, but even if we were to see more innovative deals surface, affordable housing is very much in short supply, and there need to be significant changes to the market to turn this around.”

She also warned: “It is imperative borrowers compare the overall true cost of a deal and attempt to save on the upfront cost if they have used up most of their savings on a deposit, legal fees, or moving costs.”

It comes as house prices fell by an average of around £1,000 last month following three months of increases, according to Halifax. Across the UK, the typical property value fell by 0.3% month-on-month, taking it to £286,896 in April – a £995 decrease from the average price recorded in March.

Halifax said it expects to see further downward pressure on house prices over the course of this year. Kim Kinnaird, director at Halifax Mortgages, said: “Mortgage rates are now stabilising and though they remain well above the average of recent years, this gives important certainty to would-be buyers.”


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