UK lender Skipton launches deposit-free mortgage

Building Society has introduced a 100% loan-to-value mortgage aimed exclusively at renters

Skipton says its new product will help renters get on to the housing ladder. Getty

The Skipton Building Society has introduced the UK's first mortgage that requires no deposit and can be up to 100 per cent of the value of a house.

The lender said its new product would enable renters to get on the property ladder, without relying on parents or other guarantors for the deposit, which is normally around 10 per cent of the value.

A study of 2,000 renters by the society shows that 85 per cent want to get on to the property ladder, but they are currently prevented from doing so because of the cost-of-living crisis.

Soaring inflation and rising interest rates have squeezed household budgets and reduced the amount renters who want to become homeowners are able to save towards deposits.

More than one in three of those surveyed said they were struggling to save, owing to the increase in rent payments, while 42 per cent believe their mortgage repayments would be more affordable than their current rent.

Skipton said its Track Record Mortgage product would enable tenants to break free from a cycle many feel they are trapped in.

“People trapped in renting is one of the UK’s biggest housing challenges, having a massive impact on the fabric of our society,” said Charlotte Harrison, chief executive of home financing at Skipton.

“With escalating rents and the cost-of-living squeeze further impacting people’s ability to save for a house deposit, it’s making it almost impossible for people get on to the property ladder.

“We recognise there’s a clear gap in the market for people who have a strong history of making rental payments over a period of time so can evidence affordability of a mortgage — but there is currently no solution for them to buy a property due to lack of savings or access to family wealth.

“It is time for a rethink on these massive barriers to home ownership, and we’re proud to take the lead on bringing to the market solutions for such a massive social problem.”

A woman looks in an Estate Agent window. Skipton's research shows eight in ten tenants say the cots of living crisis means they are unable to save for a deposit to secure a mortgage. (Photo by Dan Kitwood/Getty Images)

Those applying for a Skipton Track Record Mortgage would have to prove a minimum of a 12-months good track record rental history and be first-time buyers over 21.

Subject to the usual affordability and credit score tests, eligible customers would then be offered a 100 per cent loan-to-value mortgage with a 5-year fixed rate at 5.49 per cent over a maximum term of 35 years.

Skipton will also ensure that those taking out such a mortgage will not pay more in monthly repayments than they did in rent for the last six months of their tenancy.

Halifax house prices

On Tuesday, lender Halifax released its latest house price index, which shows the average UK house price decreased by 0.3 per cent in April, following a 0.8 per cent rise in March.

The annual rate of house price growth slowed to 0.1 per cent, from 1.6 per cent in March, meaning the average house in the UK cost £286,896 last month.

It also means the price of the average house is 2 per cent lower than it was when prices peaked in August last year.

“Cost-of-living concerns remain real for many households, which will likely continue to weigh on sentiment and activity,” said Kim Kinnaird, director at Halifax Mortgages.

“Combined with the impact of higher interest rates gradually feeding through to those remortgaging their current fixed-rate deals, we should expect some further downward pressure on house prices over the course of this year.”

The average UK house price fell by 0.3% in April compared to March, according to lender Halifax. PA

That downwards pressure cannot come fast enough for those first-time buyers wishing to escape the rental cycle.

“Falling prices may be good news for first-time buyers who are flooding the market to escape high rental rates, but they may have been hoping for a sharper drop in values to help them secure a better deal,” said Alice Haine, Personal Finance Analyst at Bestinvest.

“In fact, the UK housing market is probably doing better than expected when you consider the tough market conditions it is up against.”

The Bank of England is widely expected to raise interest rates by another 0.25 per cent to take them to 4.5 per cent on Thursday. If so, it would be the 12th consecutive increase in interest rates.

The money markets are currently pricing in a move to 5 per cent by September.