History
Applicants for the Skipton mortgage will need to show a credit score, plus evidence of a minimum of a 12 months good track record rental history. As an example, based on the average rent of £1,290 a month, an applicant could borrow up to £240,509 for a 100 per cent mortgage at an interest rate of 5.49 per cent over a 35-year term.
Skipton is Britain’s fourth biggest mutual, and says it is ensuring the monthly mortgage payment for each applicant is not more than the average of their last six months rental costs that they have paid.
But co-founder and CEO of Wayhome, Nigel Purves, commented: “Although the re-introduction of 100% mortgages will no doubt be welcomed by those struggling with the high cost of homeownership, it’s important that anyone considering such a product fully understands the approval process they will be subject to.
“While the concept of purchasing a home without a deposit is attractive, the income multiplier associated with mortgages would still limit the purchasing power of those with lower incomes.
“What’s more, there’s a very real risk of buyers falling into negative equity should property values start to fall. Given the unsettled market conditions seen in recent months, such a change in the market is far from out of the question and could see buyers lumbered with their property and unable to remortgage until such a time that market values recover.
“Rather than loading people up with more debt and negative equity risk, those who are truly serious about solving the housing crisis should be looking at alternative approaches that can solve the problem in a sustainable way that is accessible to more people.”
Research by specialist property lending experts Octane Capital has shown that first-time buyers opting for a 100% mortgage in the current market face a monthly mortgage repayment some £369 a month higher than those purchasing with just a 15% deposit – an additional £4,425 per year.
The research shows that, based on the current first-time buyer house price of £238,742 across Britain, the average first-time buyer securing a traditional mortgage with a deposit of 15% is placing £35,811 upfront.
This means they require a loan of £202,931, and at the current average rate of 4.22%, this equates to a full monthly repayment of £1,096 per month, or £714 for those making an interest-only payment.
In contrast, those opting for Skipton’s 100% mortgage at a rate of 5.49% would be facing a full monthly repayment of £1,465, or £1,092 for an interest-only payment.
This means that those making a full monthly repayment would be paying £369 more per month for a 100% mortgage, versus those who have placed a 15% deposit. That’s an additional £4,425 over the space of a year.
CEO of Octane Capital, Jonathan Samuels, commented: “For many first-time buyers, a 100% mortgage probably sounds too good to be true and this is unfortunately the case. If you do pass the strict lending criteria, you will find yourself very limited in terms of what you can buy, not to mention the fact you’ll pay substantially more for the pleasure.
“It may sound tempting for those who are saving tirelessly in order to accumulate a deposit, but as our research shows, you are far better off sticking with it than being tempted into a 100% loan to value mortgage product and paying a far higher price in the long run.
“What’s more, placing a deposit and borrowing less also leaves you far less susceptible to the risks of negative equity compared to those who are borrowed up to the eyeballs.”
The Skipton says that by basing its loan qualification on more than a simple income multiplier it is taking potential risk onboard, but checking whether rent has been paid on time or the borrower has been in steady employment is no guarantee of future reliability, or of the performance of the property market.
Other 100 per cent mortgages are available, but they normally rely on the requirement of having family or friends as a guarantor.
