The UK’s first deposit-free mortgage that does not require a guarantor has been launched by the Skipton Building Society, Sky News reports. It is aimed at people who can prove at least one year of rental history and have a good credit record.
The mortgage will have a higher than average interest rate, at 5.49%, compared to around 5% for a five year deal for those with some deposit to put down. There are a few other deposit-free mortgages available, but they all require family or friends to act as a guarantor. This excludes many young people from less well off backgrounds.
Charlotte Harrison, the chief executive of home financing at Skipton, said: “We need to tackle the UK’s housing affordability crisis to enable more people, especially renters who are trapped in renting cycles, to buy their first home.”
She added: “People trapped in renting is one of the UK’s biggest housing challenges, having a massive impact on the fabric of our society. With escalating rents and the cost of living squeeze further impacting people’s ability to save for a house deposit – it’s making it almost impossible for people to get onto the property ladder.”
She continued: “There’s a “clear gap in the market” for people who have a history of renting so can prove they can afford mortgage payments, but there is currently no solution for them to buy a property due to lack of savings or access to family wealth”.
However, the campaign group Generation Rent said that the problem lies in the fact that there are too few affordable properties on the market for first time buyers, and they didn’t expect the new mortgage deal to make much difference.
The situation is particularly tough for renters at the moment, with average rents rising by as much as 20% over the year in some areas of the UK. With household budgets squeezed by the cost of living crisis and intense competition for even the most basic of rental accommodation, renters often pay more than mortgage holders.
It can seem almost impossible to make savings and get a toehold on the mortgage ladder. On top of this, house prices have not fallen as steeply as expected after becoming inflated during the pandemic years.
Applicants to the Skipton Building Society mortgage will have to undergo affordability checks to ensure that they are paying no more in mortgage repayments than there were in rent, and the lender will also take into account the credit history of the applicant.
The higher your credit score, the better your chances of being able to secure a good mortgage deal. Minor blips such as a late mobile phone bill payment here and there may be overlooked, but if you have a history of missed payments or other issues such as a County Court Judgement then this will almost certainly count against you.
However, there are specialist lenders who are willing to consider applicants with lower than average credit scores, although you are likely to need at least 5% deposit.
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