Getting on the housing ladder can be tough and can be even harder when looking to buy a home in Norwich with how high property prices are vs the average wage in the area. However, the return of 100% mortgages could allow more people to buy their first home in Norwich with no deposit from themselves. 
What are 100% mortgages?
In the UK, 100% mortgages is a type of home loan where the lender finances the entire purchase price of the property. In other words, the borrower does not need to provide any deposit. However, since the 2008 credit crunch, the availability of these types of mortgages has been non-existent.
Why the return of 100% mortgages?
With sky-high house prices in Norwich and the rest of the UK, it can be a struggle to borrow enough on a mortgage. The other big issue people face is the ability to save up a sizeable deposit when they are in rented accommodation. Skipton Building Society wants to address this by releasing a new product with the aim of helping people with no deposit get a mortgage.
100% mortgages available in 2023
Skipton Building Society launched its Track Record mortgage on 9th May 2023 to try and feel a growing gap of lack of first-time buyers getting onto the housing ladder. Skipton will allow up to 100% LTV mortgage for first-time buyers currently renting, who can demonstrate a track record of affordability of ALL monthly rent and household expenditure for a minimum of 12 months in the last 18-month period.
They will allow a maximum term of 35 years with a maximum loan to income of 4.49x. One sticking point on this no-deposit mortgage is the monthly mortgage payment must be equal or lower than the average of the last 6 months’ rental cost – e.g. if the average rent over the last 6 months is £800, the mortgage payment must be £800 or lower. With interest rates being higher than rates we’ve been used to in recent years, at the current levels being charged it may limit the options available
Please note that this product may be withdrawn at any time and without notice.
Who is eligible for 100% mortgages?
You might be eligible for a no deposit mortgage if:
- Each applicant is a first time buyer
- Each applicant is aged 21 or over
- If they have a deposit, it must be less than 5% of the purchase price
- Each applicant has no missed payments on debts / credit commitments (e.g. mobile phone bill) in the last 6 months
- They are looking to borrow up to £600,000
- They meet the household-to-household criteria (see below)
- They’re not looking to buy a new build flat
- They have proof of having paid rent for at least 12 months in a row, within the last 18 months
- They have 12 months experience paying all household bills within the last 18 months.
What does household-to-household mean?
Household-to-household means that the same people who are renting now (and have been for the last 12 months) are the same people applying for the mortgage.
If applying alone, the rental and household expenditure payments must have been covered entirely by your client for 12 consecutive months within the last 18 months.
Joint applicants (maximum of 4 per application) will need to evidence that these payments have been made either:
- collectively, or
- wholly by one applicant.
Joint applicants who have been renting separate properties will be eligible, as long as each applicant can evidence that they have individually covered their entire rental and household expenditure payments. In this instance, when calculating the max loan amount based on the average rental payment over the last 6 months, their combined rental payments can be used.
Skipton building society has the right to withdraw this no deposit mortgage at any point.
Pros and cons of 100% mortgages
Pros:
- No deposit required: The main advantage of 100% mortgages is that you do not need to provide a deposit to purchase a property. This can be particularly useful for first-time buyers in Norwich and around the UK who are struggling to save for a deposit, or for those who need to move quickly and do not have time to save.
- Access to the property market: 100% mortgages can be a way for people who would otherwise not be able to afford to buy a property to access the property market. This can be particularly important for those living in areas where house prices are high.
- Increased flexibility: Because you do not need to provide a deposit, you may have more flexibility with your finances. For example, you may be able to use your savings for other purposes, such as home improvements or emergencies.
Cons:
- Higher interest rates: 100% mortgages typically come with higher interest rates than mortgages where a deposit is provided. This is because the lender is taking on more risk by financing the entire purchase price.
- Stricter lending criteria: In order to qualify for no deposit mortgage, you will need to meet strict lending criteria. This may include having a good credit history, a stable income, and a low debt-to-income ratio. As a result, not everyone will be eligible for this type of mortgage.
- Negative equity: If house prices fall, there is a risk that you could end up with negative equity. This means that the value of your property is less than the amount you owe on your mortgage. This can be particularly problematic if you need to sell your property, as you may not be able to pay off your mortgage.
Conclusion:
While 100% mortgages can be a useful option for those who do not have a deposit or who need to move quickly, it is important to be aware of the potential risks and drawbacks. If you are considering a 100% mortgage, it is important to do your research and carefully consider whether it is the right option for you. Additionally, you may want to speak to a mortgage broker to ensure that you fully understand the terms and conditions of the mortgage and the potential risks involved.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
