Introducing an innovative mortgage option tailored specifically for individuals residing in rented accommodations. It is a prominent UK building society that has recently launched a deposit-free mortgage.
While a few other mortgage deals without a deposit requirement do exist, they typically necessitate the financial support of family members or friends.
Skipton Building Society has developed a unique proposition that only mandates 12 consecutive months of punctual rental payments and a solid credit history, eliminating the need for a guarantor. Explore more.
It is important to note that although this enticing offer from Skipton Building Society presents an attractive opportunity, it comes with a slightly higher interest rate of 5.49% compared to the average five-year fixed rate of 5%.
Despite this slight disparity, the availability of such a mortgage product marks a significant step forward for Generation Rent—an advocacy group representing private renters—given the prevailing scarcity of affordable properties within the financial reach of aspiring first-time buyers. The primary hurdle faced by these individuals aiming to step onto the property ladder remains the limited availability of suitable houses.
Will Barber Taylor, a spokesperson from Generation Rent, comments, “While this deposit-free mortgage option is a positive development, it may not address the needs of all potential first-time homebuyers if there is still a shortage of available houses for purchase.” Indeed, the lack of affordable properties continues to hinder the dreams of those struggling to accumulate the necessary funds for a deposit.
Financial data firm Moneyfacts reports that 15 alternative zero-deposit products are currently offered in the market, accounting for just under 0.3% of the overall UK mortgage market. This statistic underscores the relative scarcity of such offerings.
With rapidly escalating rents making it increasingly arduous for prospective buyers to save for a deposit, the absence of the government’s Help to Buy scheme—previously aimed at assisting first-time buyers—has compounded the challenges faced by those eager to enter the property market.
Skipton Building Society, the fourth largest building society in the UK, recognizes this prevailing dilemma and has seized the opportunity to address it. Stuart Haire, the society’s chief executive, explains, “We have identified a clear market gap that needed to be filled, enabling renters to overcome the obstacles associated with limited savings or a lack of access to family wealth when trying to purchase a property.”
This bold initiative by the Skipton Building Society aims to empower individuals like David, who currently resides in North Yorkshire with his partner and their newborn. David candidly admits, “Considering the high rental prices, the most challenging aspect is saving enough for a deposit. If I can demonstrate a solid rental payment history spanning ten years, why shouldn’t I qualify for a mortgage?”
Reflecting on the past, the government’s Help to Buy scheme played a vital role in assisting homebuyers by providing Treasury loans between 5% and 20% of the cost of newly-built homes and up to 40% in London. While the scheme closed its doors to new applicants in October 2022, rumours abound that a similar initiative might resurface, offering a glimmer of hope to aspiring homeowners.
The launch of a deposit-free mortgage by Skipton Building Society represents a pioneering solution for renters aspiring to become homeowners.
Although the interest rate is slightly higher than the average, this mortgage option fills a significant gap in the market, facilitating property purchases without the burden of a deposit. Nevertheless, the scarcity of affordable homes and the absence of government support remain ongoing challenges for first-time buyers.