If you’re currently renting and starting to wonder if you’ll ever get on the housing ladder, one lender has come up with a potential answer in the form of a new mortgage deal which requires no deposit or guarantor.
The Track Record Mortgage from Skipton Building Society aims to help tenants who can’t find the requisite deposit to buy a home of their own. What’s more, it’s the first home loan of its kind to be unveiled in the UK since 2008’s financial crash, and it’s been launched this week against a backdrop of soaring rents and property prices.
The product is for first-time buyers, who will need to show a year’s worth of on-time rental payments plus a strong credit history to proceed.
The five-year fixed deal is a 100% loan-to-value mortgage and works in the same way as comparable products on the broader market.
There is no arrangement fee, but the interest rate of 5.49% is higher than for the typical five-year fix, which currently stands at 5.03%.
The key difference is that you don’t need a deposit, although if you do have one (as long as it’s below 5%), you can still apply.
Previous products involving zero deposits have traditionally required a guarantor to back the borrower. This is usually a friend or family member who already owns a place, and whose name is on the mortgage. They will be expected to cover you should skip a mortgage payment.
Here’s a summary of the criteria you’d have to meet:
- You need to be a first-time purchaser older than 21
- You must have been a tenant for at least 12 consecutive months out of the past 18 and be able to prove you’ve made rent throughout
- You can’t have household bills outstanding – or other unmet repayment commitments, even for something like Netflix or your phone bill – and need to prove this
- This loan is not available for new-build flats
- You’ll also need a decent credit history
The amount you can borrow is not allowed to be more than the equivalent of your monthly rent payments. So, for instance, if your monthly rent is £1,000, the maximum you could borrow would be £163,000, subject to affordability checks.
It’s worth noting that homebuyers on 100% deals are potentially more vulnerable to entering negative equity, meaning the property is worth less than the loan. However, this will only happen if house prices fall dramatically.
The new mortgage product has already attracted intense interest and made headlines, and is likely to be watched closely across the industry.
Skipton’s Charlotte Harrison told journalists: “The UK’s housing affordability crisis has trapped more people in renting cycles. Escalating rents and the cost of living have further affected people’s ability to save for a deposit, making it almost impossible for them to get on to the ladder. Our Track Record Mortgage has been created with these challenges firmly in mind.”
The funder of Money Saving Expert, Martin Lewis, says of the product: “I cautiously welcome it, done carefully, after advice, as an option for some”.
So this deal certainly isn’t a miracle solution for all first-time purchasers. But it will help some, especially those who have met their outgoings over a sustained period, and who have shown they can make mortgage payments lower than their rent, whether or not they have a deposit.
At Oakfield Estate Agents, we also extend a cautiously optimistic welcome to this loan deal. We believe it offers a potentially excellent opportunity for those who are new to the market, plus the chance to swap years of renting for home ownership.
We work with a team of first-class Mortgage Advisors who offer a free initial consultation so book your call back with them today to see whether this deal could set you on the road to buying your first house or flat. Book a free mortgage consultation