It’s fair to say that we thought the days of 100% mortgages were long behind us ever since the 2008 banking crisis. We saw the end of 100% LTV mortgages in the market. However, Skipton Building Society is due to release a 100% LTV no-deposit mortgage for first-time buyers. Yes, you heard that right.
While the timing is dubious in the current financial climate, it will be greeted with open arms by many first-time buyers. The product plans to reward people who have been maintaining their rent for a prolonged period without issue.
With rental prices at an all-time high and only likely to continue, with the impact of increased interest rates pushing up mortgage payments for landlords who are passing on the rise, saving for a deposit while renting is a challenge to say the least for many.
Prior to the financial crisis, it was even possible to secure a mortgage at 120% LTV with banks like Northern Rock, which was part of the problem that laid the foundations of the financial crisis.
Since the banking crisis, deposit requirements have increased, and a 5% deposit has been required as an absolute minimum, with many banks and building societies insisting on far larger deposits throughout certain periods.
When smaller deposit mortgages have been introduced, they have often been met with cynicism, as smaller deposits significantly increase the risk of negative equity, especially given the current financial conditions. However, a 0% deposit has gone one step further.
On the other hand, rents have risen by 11% in the last year, and combined with other cost-of-living increases and the real-time impact inflation is having, it makes saving for a deposit even harder. It begs the question: is opening a property with no deposit better than renting?
The scheme has been approved by the Bank of England and passes their “rigorous” assessments.
Is it worth getting a 100% LTV mortgage?
My advice would be to approach with caution and consider properties that you intend to live in for a reasonable period of time to ensure you give yourself the best possible chance of overcoming any potential turbulence with house prices and give yourself time to build up some equity.
If taking a 100% LTV mortgage, it’s more important than ever to ensure you do your due diligence when offering on properties to ensure you’re not overpaying. Use the portals at your disposal, like Rightmove and Zoopla, to check comparable properties and historic sold prices. If you’re not clued up on property, take or ask someone who is, if you know someone, or even ask for your mortgage broker’s advice.
Equity and mortgages aside, there are plenty of benefits of owning a home compared to renting, and it’s always worth considering your home as exactly that, a home, as well as a