Building societies in the United Kingdom have introduced a mortgage without a down payment for renters. There are a few other no-deposit deals available, but they all require the support of family or acquaintances.
Skipton Building Society states that a guarantor is not required, despite the fact that its deal requires 12 months of on-time rent payments and a sound credit history. A campaign organization stated that while no-deposit deals could assist buyers, the dearth of affordable housing remains a major issue.
Generation Rent, an organization that advocates on behalf of private tenants, asserts that the lack of affordable properties for first-time buyers remains a significant obstacle for those attempting to climb the property ladder.
Initial purchasers face an insurmountable battle. No longer available is the government's flagship Help to Buy programme, which operated for more than a decade and assisted over a quarter of a million first-time buyers.. This has made saving for a deposit more difficult at the same time that rents are rising rapidly.
Since the 2008 financial crisis, very few 100% loan-to-value mortgages have been available. Skipton Building Society's new mortgage plan does not require a guarantor and is only available to tenants. However, at 5.49 percent, the interest rate is higher than the average five-year fixed rate of 5 percent.
The Skipton, the fourth largest building society in the United Kingdom, claims to have identified a "market gap." Stuart Haire, the society's chief executive, told sources that until now, there was no way for renters to purchase a home due to a lack of savings or family wealth.
David is renting in North Yorkshire with his spouse and newborn child. He acknowledges that accumulating a deposit is particularly challenging given the cost of rent. In an ideal universe, they would purchase, but this is not possible. David is not alone, however. Andrew Montlake, an authority on mortgages, believes there is demand for a product like this, which gives renters an alternative option. He believes it will help some individuals climb the property ladder.
However, many renters who desire homeownership will be unable to obtain one of these mortgages. Even if a tenant has 12 consecutive months of positive rental history, they must still pass credit and affordability checks, which eliminates many applicants with CCJs or poor credit.
Additionally, it is difficult to locate an affordable rental property to establish this track record. The Treasury lent purchasers between 5 and 20 percent of the purchase price of a newly constructed home, and up to 40 percent in London, under the Help to Buy programme. In October 2022, the scheme was closed to new applicants, but there are rumors that something similar could be reintroduced. Housing Minister Michael Gove has stated that all first-time buyer assistance policies are "under review."
A rise in zero-deposit mortgages, however, may not be embraced by all, as riskier mortgages with a high loan-to-value ratio contributed to the 2008 financial crisis. Mr. Montlake acknowledges that inevitable comparisons will be made to the previous incident (in 2008). However, this was a rogue mortgage market where lenders were more concerned with volume than quality.