...By Henry George for TDPel Media.
Skipton Building Society has launched a new mortgage scheme that does not require a deposit and is aimed specifically at renters.
The five-year fixed-rate mortgage is for first-time buyers only and has an interest rate of 5.49%, which is higher than the average five-year fixed-rate mortgage of 5%.
Named the “track record mortgage,” the product is aimed at those who do not benefit from family wealth or savings and who have a good rental history.
To be eligible for the scheme, applicants need to have 12 consecutive months of good rental history and pass credit and affordability checks.
Borrowers can choose between a 100% and 95% loan-to-value.
The monthly mortgage repayment will not exceed the borrower’s last six months of rental costs.
For example, if a tenant’s rental payments have been £800 per month over the past six months, the maximum monthly mortgage payment will be £800.
According to Skipton, 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 for a deposit to buy their own home.
Meanwhile, house prices for first-time buyers have increased by approximately 18% in the past two years.
Skipton’s chief executive of home financing, Charlotte Harrison, said the product was designed to tackle the UK’s housing affordability crisis and enable more people to buy their first home.
Commentary:
The launch of Skipton Building Society’s new deposit-free mortgage scheme is aimed at helping people who are currently renting get on the property ladder.
The scheme is a response to the rising house prices and cost-of-living crisis that have made it increasingly difficult for renters to save for a deposit.
The new five-year fixed-rate mortgage does not require a guarantor and is only available to those renting a property.
However, the interest rate of 5.49% is higher than the average five-year fixed-rate mortgage of 5%.
The scheme is the first 100% mortgage to return to the market for a while, and Skipton expects demand for the product to be high, warning that it may sell out quickly.
Skipton has recognised a “gap in the market” and says the product is aimed at first-time buyers who do not benefit from family wealth or savings.
However, the lender has also warned borrowers to be aware of the risk of negative equity.
The eligibility criteria for the scheme require applicants to have 12 consecutive months of good rental history and pass credit and affordability checks.
Borrowers can choose between a 100% and 95% loan-to-value, and the monthly mortgage repayment will not exceed the borrower’s last six months of rental costs.
Skipton’s research shows that many tenants feel “trapped” in the rental cycle, paying rents that are higher than a mortgage and limiting their ability to save for a deposit to buy their own home.
Skipton’s new mortgage scheme is a welcome development that seeks to address the UK’s housing affordability crisis and enable more people, especially renters who are trapped in renting cycles, to buy their first home.
While the higher interest rate and eligibility criteria may limit the scheme’s appeal to some, it provides an alternative option for those struggling to save for a deposit.
