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?

In principle great, but I think the affordability checks should be very strong and they fixed rate period should be quite long (5yrs+). I also think we should have a law like they do in the states that you can walk away and surrender the property, if the risk of loss was on the lender they’d look at this in another way. The root cause though is how few houses are bought and the NIMBYS that block them.

We had a 100% mortgage 25 years ago. We had no help available from family. Added to that previously we had been council tenants. The council were unable to provide a reference for us, they had literally lost 6 years of our records so we were really struggling to get a mortgage at all. The mortgage enabled us to buy our forever home 3 years later.

Interest rates were high, we paid more every month for our little flat than we ever did for our house, but it was worth it. I think for a £66 000 mortgage at one point we were paying over £1200 a month!

I’m sure you did have high repayments but £1200 is unlikely to be true. 20% interest over 15 years is under £1200 on £66k. I know the early 90s were bad, but they weren’t that bad.

I am 99% certain! But could be wrong!

I had a 95% mortgage with Skipton and the criteria was incredibly strict for that. We were already paying the same amount in rent but it was so hard to pass the affordability for the mortgage. We couldn’t have a single pound in other credit so I would imagine they’ll be even stricter for 100% mortgages. I don’t think it’s a bad thing to help people get out of renting as long as it’s done much more carefully than it was years ago

Another new thing that may be of interest to FTB is this Deposit Unlock scheme (95% mortgages on new builds)

https://hoa.org.uk/advice/guides-for-homeowners/i-am-buying/deposit-unlock/?utm_source=HomeOwners+Alliance+Newsletter&utm_campaign=4822f565b0-EMAIL_CAMPAIGN_2023_04_27_08_39&utm_medium=email&utm_term=0_-4822f565b0-%5BLIST_EMAIL_ID%5D

Never heard of a 95% BTL mortgage either, sorry. They usually max at 75%, so you’d need at least £20k including fees.

I had a 100% mortgage in 1991 and it worked out very well for me. I’m delighted that reintroduction of them is Labour policy, it will help to remove some of the distortions in the housing market.

Exactly.

These new BTL wannabes are something else. Couldn’t be a worse time to get into BTL.

We had a 100% mortgage in 2000 to buy our first house. We both worked for the bank that lent us the money so got slightly better rate. It was the only way we could afford to buy.

I'd expect that this product (if approved) would only be for FTBs tbh.

Definitely be interesting to see the criteria and rates etc. If done conscientiously, I can't see how it can be anything but a good thing. And Skipton do seem to be more conscious and conscientious than a lot of the major banks or other building societies

What could go wrong.

@ThankmelaterOkay

TBF if you’re not a higher rate tax payer and in it for the growth it’s not impossible generally. But a massive responsibility to offer someone a safe, secure home, not free money !

Conscientious or trying to position themselves as a high cost high risk lender. Potato potato northern rock

But I think to make it worth it, you need to be getting the associated equity build. Is that going to happen in the next 2-3 years? Maybe, maybe not.

Otherwise it’s all the costs, effort etc. When you could stick in it in a 2 year fixed bond for 4.5%, or a bit less tax free.

Agreed. They should be for FTB that need somewhere to live.
Bad time to be getting into BTL let alone with a 100% mortgage

I'd been hoping that people stuck renting might be helped to buy a property by prices being allowed to drop somewhat, instead of the artificial propping up of the market we've seen over the last 15 years. Suppose that was probably a pipe dream.

I think it probably was a dream and we are stuck with high house prices in this country. Renting seems even worse with what I can see - high prices and a lack of stability.

@ThankmelaterOkay agreed, you wouldn’t do it and expect an income, but capital growth over 5+ years. But that would be true of any investment except cash in the bank

Private renting is a shitshow. I haven't done it for years and was more than fed up by the time I stopped, and it's got much worse since then.

DH and I are homeowners, with a good cushion of mostly unearned equity, and so on paper we benefit from this mess because our hypothetical net worth goes up. But on a societal level it's awful.

I think my concern is people might be lulled into being the bag holders if they bought now with 100% mortgages.
Prices look to be falling, house builders are pulling back, Talyor Wimpey in the news lately cutting jobs.
Rents are going up because landlords are having to refinance and passing the costs on.

I had a17% mortgage in those days - the extra in this case would have been repayments of the capital sum, assuming it wasn't interest only, although there were some of those, with missold endowment policies which added to the monthly cost without paying off the mortgage in the end (whole other story!)

Found this update - the Skipton 100% mortgage won't require a guarantor but will require 12 months of on-time rental payments and a good credit history

https://www.bbc.co.uk/news/business-65498421

Skipton Building Society’s track record mortgage will only be available to first-time buyers...paying a fixed rate of 5.49 per cent interest over five years.

And the interest rate isn't bad either

I know it looks so tempting and like a the only chance many will have to ever afford their own home, but it is far more likely to be a terrible trap for lots of people. House prices are still expected to drop rather than increase, in spite of the recent slight increase. If that happens, even if you sell your house, you wouldn't be able to repay the mortgage.

Just like so many of these schemes it is usually the poorest borrowers who lose the most. You can be sure it won't be the mortgage companies or housing developers who lose out!