A 100% mortgage is now available to enable renters to get on the housing market. The mortgage is based on the value of the property. To qualify for a 100% mortgage, renters need to provide evidence of twelve months’ rental payments and pass affordability checks.
Skipton Building Society said it was concerned that renters were unable to get on the housing ladder and the mortgage reflected its aim to solve “such a massive social problem”.
While the product is being lauded a ‘master stroke’ for the mortgage industry, first time buyers and renters have long found it difficult to get on the housing ladder. The imminent requirement to upgrade rental property to EPC C or higher is just one of the factors resulting in a reduction in the number of rental properties and growing demand for rentals from prospective tenants. As a consequence, rentals have increased beyond affordability for many.
We should remember the dearth of first time mortgages available in 2021, when most were withdrawn from the market altogether after the disastrous mini-budget deemed them ‘too risky’. Perhaps making a move to the 100% mortgage would have been more helpful for those suffering this “social problem” if it had been offered earlier.
The cynical might think the 100% mortgage is just a ruse to get more houses sold at a time when fewer properties and mortgage completions are taking place. Mortgage rates are still twice as high as a year ago, and figures currently suggest that home buyer demand has fallen 50% since the end of 2022.
It is a big well from which to drink. The National Statistics Office has reported that, in 2021, the average age of adults living with their parents was 24; over half of adults aged 20-24 and one in five adults aged 25-29 were living with their parents. These figures exclude adults still in education.
Of course, there’s also a premium to the 100% mortgage. The five year fixed mortgage rate is being offered at 5.49%; the average five year mortgage rate is 5.05% but to get anything cheaper you will need a large deposit.
Skipton’s deal would make the average home purchased for £286,896 payable in monthly instalments of £1,790, although one of the eligibility factors is the limit of monthly mortgage payments to the amount the borrower currently pays monthly in rent.
Negative equity is a risk, with house prices potentially falling in 2023, albeit less likely than it was a month ago when a drop as big as 20% was thought possible.
Ask an independent Chartered Surveyor for a professional, impartial opinion on the value and condition of the property before you commit yourself to buying a new home.