Skipton Building Society launching deposit-free mortgage aimed at ‘trapped renters’ - here’s how it works

The five-year fixed rate product is being offered at 5.49 per cent over a maximum term of 35 years.

Skipton also said it will be ensuring, when looking at affordability, that buyers will not be paying more on a monthly basis than their current rent.

Charlotte Harrison, chief executive 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 on to the property ladder.”

She added: “It is time for a rethink on these massive barriers to home ownership.”

Ms Harrison said the mortgage “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”.

Property website Rightmove recently calculated that first-time buyers with a 15 per cent deposit to put down face paying nearly £200 per month more for a mortgage typically than they did a year ago.

The website said those in the 15 per cent deposit bracket would pay an average of about £1,056 per month, compared with £865 last year, due to mortgage rates and house prices rising.

Across Britain, the average asking price for a first-time buyer-type property is sitting at a record of £224,963.

Experts said the new Skipton deal could help some aspiring homeowners to “get off the rental treadmill”, although some said that affordable housing remains in short supply.

Rachel Springall, a finance expert at financial information website Moneyfacts, said: “It is great to see more support for first-time buyers who are struggling to afford a deposit for a mortgage.

“There are very few 100% LTV mortgages in the market, but even if we were to see more innovative deals surface, affordable housing is very much in short supply, and there need to be significant changes to the market to turn this around.

“There are a few deals that will help first-time buyers get on to the property ladder with family assistance, such as the Barclays’ ‘springboard’ mortgage – however, its vital applicants and family members ensure they understand the arrangement before they commit.

“It is imperative borrowers compare the overall true cost of a deal and attempt to save on the upfront cost if they have used up most of their savings on a deposit, legal fees, or moving costs.”

David Hollingworth, an associate director at broker L&C Mortgages, said: “Skipton’s track record mortgage is attempting to serve a part of the market that has recently been wholly reliant on help from ‘the bank of mum and dad’.

“Renters will have been frustrated by the need to build a big deposit to meet high purchase prices, whilst covering steep rental payments at the same time.”

He added: “It won’t solve all the difficulties for all first-time buyers and there will be affordability limitations on the borrowing amount which may still not meet the required purchase price.”

Mr Hollingworth continued: “There will always be concerns that no deposit could risk negative equity, but this is a longer-term product for that reason, and if it can help some accelerate the move from renting to home ownership it could be a significant new product.”

Andrew Montlake, managing director of mortgage broker Coreco, said: “There are many potential buyers who have proved they can afford to pay rent at the current high levels, but just do not have the means to meet ever-increasing deposit levels and feel constantly at the mercy of rising rents.

“Whilst I have had some concerns in the past, the time now seems right for a new type of 100 per cent mortgage, one that is underwritten prudently and where affordability is carefully taken into account.”

Mr Montlake added: “This new product will not be suitable for everyone, but it will help some of the new generation of home buyers get off the rental treadmill and enjoy the security of owning their own home.”

Simon Bath, CEO and founder of property technology company iPlace Global, said: "The huge increase in inflation - most notably on mortgage interest rates which we saw at the end of 2022 - has had a detrimental effect on a generation of first-time buyers in terms of their ability to get on the property ladder.

"Rapidly rising rents have made saving for a deposit increasingly difficult, at the same time that the government's Help to Buy scheme, which ran for more than ten years and helped more than a quarter of a million first-time buyers, is no longer in operation. The new scheme from Skipton will come as welcomed news for many who feel that support for getting on the property ladder has been lacking in recent years.

"Whilst more support is needed for generation rent, I remain wary that interest levels are higher on this mortgage deal which will make it unaffordable for some. It's also important to remember that we saw a rise in riskier mortgages with a high loan-to-value more than a decade ago which was a root cause of the 2008 financial crash. However, as long as affordability tests are stringent, this may provide many in generation rent with a much-needed avenue to finally escape onto the property ladder.”