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The 100% Mortgage Returns

In a bold move to help first-time home buyers struggling with the need for a deposit, Skipton Building Society has introduced a mortgage that doesn’t require one. This 100% mortgage caters specifically to tenants who are looking to purchase their first homes, but have been held back by the lack of a deposit.

This new 100% mortgage comes with a fixed rate of 5.49% for five years, with a maximum term of 35 years. The total loan that can be taken out is capped at £600,000, and borrowers can access up to 4.49 times their income. Stuart Haire, Skipton’s CEO, hinted at such a move earlier in April, indicating the society’s intent to aid first-time buyers struggling to accumulate savings for a deposit.

The mortgage is open to all first-time buyers who are currently tenants and meet Skipton’s affordability criteria, which enables them to borrow up to 100% of the property’s value. Charlotte Harrison, a spokesperson for Skipton, noted the significant challenges the UK housing market is facing, with a surge in renters who are unable to save for a deposit due to escalating rent and cost of living.

Skipton’s aim is to bridge this gap in the market, providing a solution for those with a strong history of rental payments and proven affordability but lack the necessary savings or family wealth to make a down payment. The society views this as a proactive step towards addressing the barriers to homeownership.

At Robinson David Estate Agents, we often feel the pain of tenants, who after achieving years of on-time monthly rental payments, are frustrated with lenders not taking these rental payments into consideration, which one would think should be taken into consideration above all else being identical to paying a monthly mortgage payment, so Skipton’s bold and progressive step forward for tenants now, we feel is long overdue, very positive for the property market as a whole, and is reason to celebrate.

The mortgage, which is known as the Track Record Mortgage, has been designed with potential risks in mind, particularly the concern of negative equity. Many critics have voiced worries that 100% mortgages could lead borrowers into negative equity, which occurs when the mortgage’s value exceeds the property’s value.

The current mortgage landscape for first-time buyers is riddled with obstacles, including high mortgage rates following last year’s surge in borrowing costs and persistently high property prices. These factors combined with the challenge of meeting lenders’ affordability criteria, make it difficult for potential buyers to assemble a deposit.



According to Skipton, the number of private renters in England has more than doubled since 2000, totalling a whopping 4.6 million households! Within this number, four out of five tenants feel caught in the rental cycle, with their rent often higher than what a mortgage payment would be. This predicament prevents them from saving for a deposit.

Over the past two years, house prices for first-time buyers have increased by an average of 18%, which equates to a rise of £39,680, where over a third of renters cite these higher monthly payments as a barrier to saving for a deposit. A survey from Ipsos revealed that nearly a third of renters have little choice other than to spend at least half of their income on housing, a stark contrast to only 17% of mortgage holders.

Skipton’s 100% mortgage acknowledges the financial pressure on first-time buyers who have consistently met their rental and household bills over a significant period. This mortgage product is intended for those who can demonstrate their capacity to manage a mortgage payment that is lower than their current rent, regardless of a deposit’s availability.

The offer presents a balanced approach that recognises the robust payment history many tenants have established. However, it won’t solve all first-time buyers’ problems as there will still be limitations on borrowing amounts which may not meet the purchase price required.

This innovative mortgage product, while beneficial for first-time buyers and a stagnant property market, isn’t without risks. One of the primary risks associated with 100% mortgages is the potential for negative equity. This scenario might occur if there’s a significant drop in property prices.

The Skipton mortgage requires applicants to present a credit score and evidence of a consistent, good track record of rental payments for at least 12 months. Based on an average rent of £1,290 per month, an applicant could potentially borrow up to £240,509. This would be a 100% mortgage with an interest rate of 5.49% over a term of 35 years.

Skipton, which ranks as Britain’s fourth-largest mutual, is committed to ensuring that the monthly mortgage payment for each applicant doesn’t exceed the average of their rental costs over the last six months. This means, for instance, if a tenant has been paying an average of £800 per month for the past six months, their maximum monthly mortgage payment would also be set at £800.

The offering from Skipton, though unique in its approach, is not the only 100% mortgage available in the market. According to Moneyfacts, there are currently 15 other 100% mortgages. However, each of these requires a guarantor, typically a family member or a friend.



Despite the opportunities and relief that a 100% mortgage can offer, particularly for trapped renters, it’s essential for prospective borrowers to carefully consider the associated risks, because if property prices fall only slightly, then the 100% mortgage could end up costing more than the value of the home, which means that negative equity, where the mortgage value becomes greater than the property value, is a realistic risk with 100% mortgages in a declining market.

For instance, with a 100% mortgage from Skipton amounting to £150,000 at 5.49%, after five years, a homeowner would have paid £55,200 in repayments, but the mortgage balance would still be £137,000. This translates to a loan-to-value ratio of 91%. If the property value were to decrease to £140,000 in that time, the homeowner would have a loan-to-value ratio of 98%.

Negative equity can have severe consequences, which some 2020/2021 market boom home buyers are currently facing, potentially making it difficult for homeowners to remortgage or move house. Few remortgage deals are available for those with a loan-to-value ratio of 95% or more, and individuals may be unable to switch to a more affordable mortgage deal.

Therefore, while Skipton’s 100% mortgage offers a promising path towards homeownership for many, it’s crucial for potential borrowers to fully understand the risks involved before making a commitment. Being armed with all the facts will enable first-time buyers to make an informed decision about whether this is the right route for them.



Information in this article is only valid at the point of writing, and subject to change with market conditions. As part of our ever growing trusted working relationships with many Gloucestershire based businesses, Robinson David Estate Agents have an excellent relationship with a trusted independent mortgage advisor based in Gloucestershire. If you are considering buying a property or remortgaging your home and would like knowledgable advice, contact us today and we will be delighted to connect you.


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