100% mortgages possibly returning

[salto]

I was reading an article before which said Skipton Building Society are looking to bring back 100% mortgages. It’s currently awaiting approval but is thought to be designed to allow people who are currently renting and can evidence rental payments to buy a home without a deposit. It will be subject to strict criteria and good credit scores.

This would benefit so many if it happened, including us. We currently have a 5% deposit but getting to 10% will be hard considering how high house prices are at the moment. It’s also nice to think we could keep this deposit as a safety net or rainy day fund.

Other than the risk of negative equity what are you thoughts?

Oh definitely.

It will be interesting to see what kind of history they will want and how it relates to % they will lend. Or amount they will lend

So a guarantor mortgage would again rely on family who could cover it and probably not an option for a lot of people who don’t have family support for a deposit in the first place? Or am I missing something?

A guarantor mortgage would yes, but we don't know if Skiptons product will be a guarantor mortgage.

You’re not missing anything but there are obviously some people who benefit from a guarantor mortgage- whose family will help them to an extent but not by gifting them 50k (or whatever they need for a deposit).

And as @BrimFullOfAsher has pointed out, this new 100% mortgage being introduced by Skipton may not be a guarantor mortgage (though granted all the others have been).

Thank you both

The idea you need a deposit to prove you can afford a mortgage when most people now get help from family anyway is just a bizarre.
Newsflash - "most people" don't get help from family outside of your middle class bubble.

@Liorae the deposit is to mitigate some of the risk to the lender. if property prices fall or people default on the mortgage etc it costs a lot to repossess and they will unlikely be able to recover 100% mortgage whereas if someone had laid down a deposit it’s a buffer againist this risk.

That must make you feel absolutely sick when written down.

We are 275k in but can’t get a mortgage

Why would you need a self cert mortgage if you have several years of income proof?

I understand why people want them. Getting a deposit is very hard (I didn't get family help). However I do worry that it will send house prices rocketing again

Self declare was part of the problem for mortgage prisoners. No other lender would touch them so they were stuck. That and 125% mortgages caused more problems than 100% mortgages based on income.

I had the same thoughts about prices as there are millions of renters, and I’d imagine a good portion want to buy.
but, not all will want to, not all will be able to where they currently need to live. Presumably the lending capacity is finite, not all will have good enough credit.
i think after an initial flurry it will be more of a drip drip of purchasers which will have less of an affect. It will also make BTL marginally less attractive as there will be slightly fewer renters in the pool.
ultimately getting people in stable homes who want to be able to be in them is a good thing.

I frame it as 'This is what it cost us to have a roof over our heads.' I have to use that thinking when I calculate the nursery fees which are more than the rent!

It just feels like a desperately unfair system - every single person I know got on the property ladder with inheritance or help from parents.

@Seasonofthewitch83 it feels shit, unfair and very bleak looking into the future doesnt it.

I think it’s important that renters realise that some of the sums have changed because of the BoE rates rises. While they were low, it was famously cheaper to rent than own.

So I bought my house for £275k when rates were low. I had a 10% deposit which meant I paid 4% and my monthly payment was about £1300. To rent, my house would have been £650 pcm. I couldn’t access the lower rates as I didn’t have enough of a deposit. I also needed to spend £5k on new windows and doors.

5 years later, I had over paid a bit, the value of the house went up and I remortgaged to 1.2% and extended the loan by 2 years from
20 to 22. Then my payments were just under £990. Rents were about £700 pcm. So more even but not actually less. As I earn more and throw overpayments at it and inflation eats at the debt, I will end up better off than renters but it definitely didn’t happen straight away. The repairs I needed to do HURT. My boiler breaking 2 days before Christmas nearly made me cry.

For first time buyers who have no or little deposit, the rates are very high and as soon as you have a month where you know you’ve got your car service scheduled and your MOT needs sorting and the road tax and you think “I just won’t go out this month - it’s freezer pizzas and Netflix this Friday and a bottle white from Lidl” THAT is when the mains pipe cracks in the ground outside your house and floods your sitting room while you’re at work. Or your fence gets blown down which isn’t covered by insurance and your neighbour demands you fix it asap and one or both of you has hens or a dog.

Home ownership is very expensive and stressful at the beginning. It’s worth it in the end but it’s not the sunlit uplands of bunnies and clover.

I genuinely think in my old age, I will sell my house and rent off the National Trust (who never want you to move out) and let them just take care of the hell and expense of maintaining a property.

As mortgage rates go up, landlords put the rates up.

my previous rental my landlord put the rent up 40% in one month (this was before interest rates went up).
the fences blew down, we repaired them. Our hot water tank needed replacing, it needed retiling and plastering when the tiles fell off the wall. Guess who paid. Not the landlord. Us.

this is the reality for a lot of families renting. Over the years our rent has gone from, £1000 - £1750 with each house move to a smaller house. Had we bought that first house our mortgage would probably be £700-£900 and 10 years off being paid off.
instead renters are looking into a future of higher rents, never paying it off and never being able to retire or leave your kids an inheritance. the only positive I can gain is letting the government pick up my care home fees.

I do agree renters can have a crap deal - I rented for years and years in studios but I didn’t have to do my own fences or anything like that. Though I couldnt have afforded a place with a garden or a separate bedroom as I was saving whatever I could for a deposit. I hated sharing with flatmates so went for a studio probably at a cost to my bank balance. I just rang the agent whenever anything went wrong and it was fixed. I wanted my own home so so so badly and going from my savings for a deposit to being overdrawn for years was not something I’d anticipated. I just thought as soon as I became a home owner all my financial troubles were over. I was wrong. And that was during the lowest ever rates. 100% mortgages won’t be the answer to everyone’s problems.

In my experience (granted limited to only a couple of mortgages/house purchases) the repayments on the mortgage have been less than what the rent would be. And not by an insignificant amount (between £150-£400 pm). A buyer used to paying that extra in rent could easily afford to buy a new fence or save x amount pm for emergencies or repairs.

I would advise only do it if you will be able to get yourself into a position where you have at least a 95% LTV by the time your initial deal is over. Like pp said, sometimes lenders go bust, and your initial fixed deal will be over sooner or later, at which point you need to be in a position to get a more normal mortgage in case LTVs worse than 95% aren't being accepted anywhere. Negative equity certainly can be a problem, even if you don't need to move, if you can't access competitive interest rates come renewal time, and get stuck paying an uncompetitive SVR that means you are paying a lot more.

@MacarenaMacarena thanks for those figures - very useful. My own situation for btl wouldn't need a mortgage due to small inheritance, but I can see several friends who rent who could benefit from a 100% mortgage if the property & situation was right. Right now, the price of work of doing up houses is a big concern for lower value properties

Though I'm cautiously in favour of 100% mortgages, I wouldn't advise one on a property that needs loads doing to it, due to escalating costs of builders, plumbers, electricians etc.
I wouldn't really advise anyone to take on a renovation project at the moment unless they have thousands & thousands of pounds stored away and a big contingency budget because these things always seem to cost more than you think.

I hope this becomes more easily available for FTBs. Saving a huge deposit while renting must be incredibly difficult and as things stand it’s only those getting help from family that can buy a place. We certainly couldn’t have done it without a 100% mortgage back in the day.

£3k = 5%.
So, the house/flat is worth £60k?

And you want to charge £750pcm? Riiiiiight.

15% yield?

Sounds wonderful I'm pissed off paying extortionate rent every month when a mortgage would be cheaper!