Are we about to see the return of 100% mortgages back in the UK?
According to a number of articles in the tabloids in recent weeks, we could see just that. Since 2008 these types of products have been none existent due to the credit crunch that shortly followed. Since then lenders have been hesitant to return to this type of lending given they got their hands burnt previously.
Fast forward to today and there are talks that Skipton Building Society is working on a new product which will allow first-time buyers to get on the housing ladder without a deposit being saved. Helping people who are trapped in the rental cycle and unable to save for a deposit to get on the property ladder.
As of 25th April 2023, there is no firm date of when this 100% mortgage will make a return and Skipton is yet to release details on the required criteria. With there still a lot of uncertainty around the future of house prices for the rest of 2023 we still remain unsure if now is the right time to be launching this type of product. Of course, there are some huge benefits to this scheme which will help more first time buyers get onto the housing ladder who have been unable to save a deposit after being stuck paying high rents for years.
The main concern around 100% mortgages is a repeat of what followed in 2008 where house prices dropped by huge percentages, leaving thousands of mortgage holders in negative equity. Resulting in many people being unable to sell their homes and resulted in properties being repossessed. On top of this if you open up the floodgates with people being able to buy a house with 100% mortgages the demand for property will increase and will ultimately push house prices even higher.
What are the alternatives to 100% mortgages when you have limited saved deposit available:
1 – Loan as a deposit – There is currently a small number of lenders who may consider a personal loan being used as a deposit. Not every lender will consider this so it’s best to discuss this scenario before applying for a loan to make sure it would be a viable option. You also need to be mindful you will not only have a mortgage payment to make but also an unsecured personal loan payment which could make the monthly cost very high each month. Also having a personal loan could impact the overall amount any mortgage lender could lend you.
2 – Shared ownership – Shared ownership is where you buy a percentage of a property between 25% to 75% and then pay rent on the unowned share. However, there is also a lender who will consider 100% mortgages on the share being purchased. This often can be seen as a middle ground of making that step onto the property ladder.
3 – Right to buy – This is designed for council tenants who have been renting a council property for over 3 years, this will entitle them to purchase that property at a discount (dependent on the period of renting the property) there are many lenders who will allow buyers to take out a 100% mortgage on the discounted purchase price.
If the above isn’t possible, typically lenders will require a minimum of a 5% deposit subject to credit score and the intended property you wish to buy.
*Please be aware this blog contact external links and would result in leaving our website. Please note that neither Dimora Mortgages nor First Complete is responsible for the accuracy of the information contained within the linked site accessible from this page. All information is correct as of 25th April 2023.