After recognising a gap in the market, a UK building society has launched a deposit-free mortgage aimed at renters and first-time buyers.
Skipton Building Society has launched the UK’s first 100% LTV (Loan to Value) mortgage for renters, which will allow those stuck renting to get a foot on the ladder without having to spend years saving for a deposit.
The new deal known as a ‘Track Record Mortgage’ lets tenants who can provide evidence of affordability for a mortgage borrow up to 100 percent of a property value – which is hoped to alleviate the pressure and ‘take away the dependency on the Bank of Mum and Dad or guarantors.
The new scheme is available to people aged 21 and up, and first-time buyers are exclusively offered the five-year fixed mortgage subject to a credit score and proof of 12 months ‘good track record rental history.
There are currently 4.6m households renting privately across England, which is double the number recorded in 2000, according to Skipton Building Society.
They found that eight in 10 tenants felt trapped in a rental cycle, paying rent higher than that of a mortgage which was stopping them from saving for a deposit to buy their own home.
House prices have also risen by an average of 18% over the last two years, which means first-time buyers are struggling to afford a deposit to get on the ladder.
Charlotte Harrison, CEO 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.
“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 get onto the property ladder.
“We recognise there’s a clear gap in the market for people who have a strong history of making rental payments over a period of time and can evidence affordability of a mortgage – but there is currently no solution for them to buy a property due to lack of savings or access to family wealth.
“It is time for a re-think on these massive barriers to home ownership, and we’re proud to take the lead on bringing to the market, solutions for such a massive social problem.
“This is why we’re introducing our Track Record Mortgage. It has been carefully created with the challenges generation rent is facing in mind, together with the potential risks and challenges they may encounter in the future too.
“In building our mortgage product with these challenges at the centre we’re ensuring considerations around negative equity have been fully taken into account.”
Generation Rent, a campaign group that fights for the rights of private rents said that the shortage of budget-friendly properties for first-time buyers was still a huge issue which would mean that although the deal may help there is still that obstacle to tackle first.
“It’s not necessarily going to help all the people who are looking to buy a first-time home if there aren’t more houses available to buy,” says Will Barber Taylor from Generation Rent.