Deposit-free mortgage launched in UK


Isobel Lawrance

ninth Could 2023

Studying Time: 3 minutes

Deposit-free mortgage – is it value it? 

A UK constructing society has launched a deposit-free mortgage choice. That is particularly being geared toward these presently renting and folks struggling to get on the property ladder. 

Skipton Constructing Society has mentioned that though the brand new deal requires 12 months of on-time rental funds, it doesn’t require a guarantor. A very good credit score historical past can be a requirement, nonetheless different deposit-free mortgage offers additionally want the monetary backing of household or mates. This doesn’t. 

However what’s the catch? 

Effectively, the rate of interest on mortgage repayments is 5.49% – greater than the typical 5% for a five-year fastened price mortgage. 

There are presently 15 zero-deposit merchandise out there. That is slightly below 0.3% of the UK market. 

An enormous roadblock for a lot of attempting to get onto the property ladder is attempting to save lots of sufficient for a deposit. One other drawback confronted by these wanting to purchase for the primary time is with the ability to discover a property that’s inside funds and reasonably priced. 

Hire will increase inside the final 12 months have made it ever troublesome for renters to economize for a deposit, and for a lot of, shopping for a house in any respect appears completely out of the realm of chance. Though Lifetime ISAs (LISAs) can be found for these wanting to save lots of for a house, the unique Assist to Purchase scheme, launched by the federal government, is now not an choice. 

The Assist to Purchase scheme consisted of the Treasury lending homebuyers wherever from 5% to twenty% of the price of a newly constructed residence – rising to as much as 40% in London. This closed in October 2022. 

Based on Skipton Constructing Society, eight in 10 tenants really feel “trapped” within the rental cycle. 35% of renters additionally mentioned they have been now struggling to save lots of in direction of a deposit as a consequence of elevated rents, with many having to seek out as a lot as £1,000 further a 12 months for his or her landlords. 

Charlotte Harrison, CEO of Dwelling Financing at Skipton, mentioned:  

“We have to deal with the UK’s housing affordability disaster to allow extra individuals, particularly renters who’re trapped in renting cycles, to purchase their first residence. 

“Folks trapped in renting is among the UK’s greatest housing challenges, having an enormous influence on the material of our society. With escalating rents and the cost-of-living squeeze additional impacting individuals’s capability to save lots of for a home deposit – it’s making it virtually not possible for individuals get onto the property ladder. 

“We recognise there’s a transparent hole out there for individuals who have a powerful historical past of creating rental funds over a time period so can proof affordability of a mortgage – however there’s presently no answer for them to purchase a property as a consequence of lack of financial savings or entry to household wealth. It’s time for a re-think on these large boundaries to residence possession, and we’re proud to take the lead on bringing to the market, options for such an enormous social drawback.” 

Nonetheless, zero-deposit mortgages aren’t welcomed by everybody. They’re seen as riskier mortgage choices, with a excessive mortgage to worth. Most of these loans have been a root explanation for the 2008 monetary crash. 

Economists have warned that lending to individuals as younger as 21 years previous, with little or no credit score historical past may result in damaging fairness for debtors. That is particularly the case at a time when home costs are below strain. 

Jasmine Birtles, founder and CEO of says:

“I’m not pleased about 100% mortgages. They only burden individuals with means an excessive amount of debt and simply put them right into a damaging fairness state of affairs. We’re presently at a stage the place home costs appear like they may begin to drop so somebody with a 100% mortgage would go into damaging fairness inside months of shopping for their place if costs did drop within the subsequent month or so. Again in 2008 when the monetary crash began there have been lots of people with 100% mortgages – even 120%! – and that was a part of the issue.”




Please enter your comment!
Please enter your name here