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100% MORTGAGES

Written by: Keoghs Solicitors

Date: 1st June 2023

In an effort to tackle the housing affordability crisis in England and Wales, the market has seen the return of 100% mortgages. Skipton Building Society are the first to offer this product since the financial crash in 2008.

Due to the cost of living and high rents, one of the biggest barriers preventing first time buyers from getting onto the property ladder is saving for a deposit. A typical deposit ranges from 5 to 10% of the purchase price. The re-introduction of the 100% mortgage is intended to assist those who are unable to save and/or stuck in the rental cycle.

What is a 100% mortgage?

 A 100% mortgage is a loan which is equal to the entire value of the property. For example, if the purchase price of the property is £200,000, the mortgage amount would also be for £200,000. No deposit is required, meaning that a buyer will not own any equity in the property.

Skipton are offering a five-year fixed rate mortgage to first-time buyers with at least a 12-month clear rental history and subject to an affordability and credit check.

Whilst zero deposit mortgages are a quicker way for buyers to get onto the property ladder and may be considered cheaper than renting, such mortgages have been considered as riskier loans due to its high loan to value. This was heightened following the 2008 financial crash in which many borrowers were unable to keep up with their repayments.

There is also a risk of buyers falling into negative equity should property prices fall and the value of the property is less than what is owed on the mortgage.

Other options for First Time buyers?

 Since the Government’s Help to Buy Equity loan scheme is no longer available, buyers are looking for alternative options, such as Shared Ownership schemes, Joint Borrower/Sole proprietor mortgages and gifted deposits from family members.

We would recommend that anyone looking to purchase their first home should consult with a qualified mortgage broker or financial advisor who will be able to advise on their affordability based on their personal circumstances.

If require any conveyancing assistance or if you have any questions, please contact Becky Tang or any other member of the Keoghs Nicholls Lindsell and Harris Property team on 0161 456 8125.

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