Lenders are expected to start offering 100% mortgages for the first time since the global financial crisis in 2008.
Skipton Building Society is planning to launch a loan for first-time buyers who do not have a deposit in a move that could start a trend in the mortgage sector.
Skipton’s new 100% mortgage product aims to help more people get a foot on the housing ladder and boost activity in the housing market.
Stuart Haire, chief executive of Skipton Building Society, said he wanted to “help those trapped in rents”.
Although the precise details of the loan have not yet been released, the deal is expected to be fixed for two years, and borrowers will almost certainly be required to demonstrate a history of paying rent at a similar level to a mortgage repayment for up to two years.
Haire told The Times that Skipton was trying to find a way around the roadblock faced by first-time buyers who regularly paid rent but cannot get a mortgage due to being unable to save up for a 5%.
But some analysts have warned the return of a 100% will leave borrowers at greater risk of negative equity if the value of their home falls.
Prior to the 2008 financial crash, all large lenders including Lloyds and HSBC offered no-deposit mortgages.
These loans were banished from the market following the crisis amid a crackdown on risky lending.
But the lack of affordable mortgage options for first-time buyers has increased their appeal amid concern in the government that its plans to increase homeownership are at risk.
In an effort to boost purchasing power the government might be considering a revival of the Help to Buy scheme, which offered first-time buyers loans for newly-built homes.
This is aimed at renters, according to other press releases, at a rate of 5.49%.
No guarantor needed, and will certainly help some people to get onto the ladder.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Let’s look back to lessons learnt (and forgotten) in the credit crunch. Is this a good idea?
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
On the face of it this would seem a welcome move but is it really? The article doesn’t mention if the loans will be on any type of home or just new builds. I expect new builds only as lenders will perceive them as being less risky and a better bet to sell if they repossess. New build starter properties are more expensive to begin with than bigger sized older properties and new build prices will probably rise as more customers become available and demand increases.
The product is designed to help “trapped renters” but will it really? While you may get a 100% mortgage the amount you can borrow I am sure will still be based on what you earn not what you might have been affording to pay in rent.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register