Described by some commentators as a "revolutionary" way to help people off the high rents treadmill and into homeownership, Skipton's 100% mortgage has sparked lots of interest in the media. We caught up with Emma Crocker from our UK mortgage team to ask for her initial thoughts on what this could mean for the UK mortgage market.
A new addition to the UK mortgage product range
In May 2023, mortgage lender, Skipton, announced their ‘Track Record’ mortgage, which can allow first-time buyers to borrow up to 100% of their mortgage and remove the need to put down a deposit altogether. It is aimed primarily at renters who are struggling to save for a deposit and has seemingly been launched, in part, due to the rising rent costs across the UK. We caught up with
This is the first example of this mortgage type since 2008, with many debating whether this is a positive addition to the suite of mortgage options, or whether it may have wider repercussions for the landscape of the already volatile property market.
Key details about the 100% mortgage and who is eligible to benefit from it:
To apply, all applicants need to:
- Be a first-time buyer aged 21+
- Have been renting a property for 12 consecutive months of the last 18
- Be up to date on household bills for at least 12 consecutive months of the last 18
- Have not missed any repayments over the last 6 months, like mobile phone repayments
- Borrow no more than £600,000
- Not be looking to buy a new build flat
- Have either no deposit or a deposit less than 5% of the property asking price
Key details:
- The interest rate is currently 5.49% fixed for 5 years, however this could change
- There is no minimum mortgage term, the maximum term is 35 years
- 4.49x loan to income ratio (LTI)
At first glance, do you see this as a positive move by Skipton?
“I think there is certainly a market for this type of mortgage offering; there are many renters paying more in rent per month than a mortgage would cost them. So what if they can’t afford a deposit? The ability to demonstrate this higher level of repayment should allow them to apply for a mortgage and get on the property ladder.
That said, I think borrowers need to be careful when considering this type of lending. What happens if properties decrease in value - how does this leave the borrower? This could lead them to fall into negative equity with no way of being able to exit the rate without a considerable early repayment charge. It’s a little too early to say how popular this new product will be; for example, at 5.49% the rate is much higher than its 90% loan or 95% loan competitors.”
Who should consider this mortgage product?
“This mortgage is good for first-time buyers that are desperate to get on the property ladder, who may not have the means to save a deposit - especially with the recent increase in rent and the overall cost of living. The downside is the negative equity aspect; what happens if you need to sell your property at short notice or if you need to sell because you’re unable to afford the mortgage any longer? How much is it really going to cost you to redeem the mortgage and could it leave you in a worse situation than you were in before?
Some may see that this new product waives the need for a deposit, get too excited and commit without doing the proper research. Nothing is too good to be true and everything carries risks – it’s really important to get advice that applies to your own individual situation and needs, before making any big decisions.”
What wider implications do you see this having on the mortgage market moving forward?
“My initial thoughts are that, overall, this is a good addition to the mortgage range. Skipton are offering something that other lenders aren’t, so it’s giving them the edge among those that are being affected by the spiralling rental market and are finding it difficult to save for a deposit as a result. Maybe this could spark the widespread return of the 100% mortgage and more lenders will see its appeal, but only time will tell!”
Speak to Emma
Emma has been in the mortgage industry for over 25 years, working for lenders, advisers, and even solicitors, so she's experienced the mortgage and property process at every stage and from every angle.
If you have a question about your own mortgage situation, please don't hesitate to get in touch.
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