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?

But they won’t have to repay the mortgage unless they want to move house? And prices going up or down is the same “trap” for all homebuyers not just those with 10 % mortgages so I think you’re being unnecessarily pessimistic.

In the long run prices will go up again. And it offers a lot more security than renting forever with the price of rentals increasing all the time.

I completely disagree. It’s a really sensible way to help people who pay rents higher than a mortgage payment would be. My first purchase was with a 100% mortgage in 1991, without that I’d still be renting now. The only time it matters that you’re In negative equity is when you sell.

I work in mortgages (not for Skipton) and I had a quick look out of interest
It bases what you can borrow on the rent you are paying currently but the amount it is offering is very low and I imagine in areas where rents are highest I.e London and the SE you can barely buy anything with the amounts they would offer even without the need for a deposit

My first mortgage was a 100% mortgage in 2005, quickly slipped into negative equity when the 2008 crash came along. This wasn't a huge problem because we didn't move for many years but it has huge implications if you do need to sell up.

This is true. We were excited for it coming through today but we won’t be able to afford to do it because our rent is too low, so we’d only be able to borrow 130k and that wouldn’t get you anything round here. Possibly a one bed flat that would need a lot of work doing but risk of negative equity is so high especially given we’d need to move on very quickly if we bought somewhere so tiny.

No idea how people in London or those in house shares paying for expensive rooms will get on.

Worked in the mortgage and financial industry over the period that 100%-125% LTV mortgages were being agreed prior to the 2008 financial crash. I honestly think they are a very irresponsible product and place the borrower in a potentially very vulnerable situation. Have we not learnt from prior mistakes? (and I am aware of their strict lending eligibility). Avoid, avoid, avoid!!

Does that start off as £13.5k interest per year?

Sounds like a great deal….for banks.

Strict criteria being not for second mortgages

I've just had a look at the Skipton website and entered some numbers. The amount someone can borrow is very, very low.

If someone is living somewhere where rents are £1500 per month, Skipton will only lend them around £244,000. I can't see that going very far in such an area.

It's a shame as I am all for 100% mortgages in principle and wouldn't mind seeing them back on the market.

I don't understand all this 100% mortgage and negative equity stuff. We are mortgage prisoners on a 90% LTV so saved and paid a 10% deposit.

Paid £105k, which was actually CHEAP at the time for a one bed flat, everything went tits up and it's now valued at £50k, still £75k left on the mortgage so we will basically be stuck in this miniscule flat until we die basically... So there is risk either way

I would say that they have learnt from previous mistakes yes as the lending eligibility is much stricter and the maximum percentage is 100%.
I don’t agree with 125% mortgages but 100% I don’t have a problem with as long as people understand that they could fall into negative equity if they had to sell within the first few years as prices don’t always go up short term.

If buying a one bed flat that needs work doing to it is your only way of getting onto the property ladder, then that is what I would do. It’s what lots of people have done for many years on normal mortgages.

Doing work to a property is a good way of adding value. Buying a one bed is far from ideal I know but neither is renting forever.

The 100% mortgage we got around 1999 was probably the most influential thing that happened in my early twenties. Neither of us brought anything financially to the relationship, we were both training in professional occupations so were a fairly good bet but no guarantees of course. Scottish Widows helped us buy our first house at 100% with an interest rate of just over 5% as I recall. I had to put other fees on my Barclaycard! We have been so lucky to have security and reasonable payments and this has helped us make choices in our lives. The rents I see round here are too high for anyone to pay with any chance of saving. Given my experience, I think that they should be on offer - I appreciate they are not for everyone.

I got a 100% mortgage at 20. It was the scariest few years and it didn't work well for me.
I'm lucky that I don't live down south so was able to rebuild myself back up though and now own a house with DP.

I think quite honestly that 100% mortgages are a wonderful idea for many people and everyone should be able to afford to own a home should they wish.
It just needs to be done so you can pay both interest and repayment, which wasn't the case last time.

I'd definitely like to see first time buyers given more help, rents are astronomical aren't they?

Interest only mortgages are not common these days and those lenders who do offer them will require a decent deposit so these new 100% mortgages will be interest & repayment.

My 100% mortgage was a straight forward repayment mortgage. Interest only didn’t exist then.

Funny how people see this as helping people.

How come the banks didn’t offer 100% mortgages when BoE rates were 0.1%? Cos they would have made fuck all on them.

Now you’ll be paying pretty as much in interest as you pay in rent. Yet with an asset that could lose value.

The house always wins.

It is helping people. If you pay rent for 25 years you have fuck all to show for it at the end. If you pay interest on a mortgage for the same period, you own the house at the end. Do you really need to have that spelt out for you?

Obviously lending money makes a profit, there would be no point otherwise. Property has never lost value over the long term. The value of ours has gone up and down but 24 years after we bought it, it’s “worth” over four times more than what we paid for it according to Zoopla.

Well, different types of winning really.

At the moment, my LL wins while I repay his mortgage for him.

I live in constant fear of rent hikes, evictions, the struggle to find a new home without disrupting DD education.

With my own house, thats mine, for life. I dont care if the value goes up and down. It will still be mine as long as i repay the mortgage.

It isn’t always winning if you buy at the wrong time and are short of cash heading into a potential recession or tricky time for the country economically.

If you don’t have any equity cushion at all, buy a place that’s a bit scruffy with a mortgage at 5% interest, your payments honestly are likely to be more than rent - mine were double what rent was and that was in low interest days. And I had a deposit. Then you realise your property wasn’t expensive because water is streaming down the chimney when winter comes. And then you realise you’re facing redundancy.

People who need 100% mortgages are those who can least afford to have any one thing go wrong.

No it's a terrible idea. If people can't save a deposit while paying rent, then how will they save while paying a mortgage? Saving becomes more important once you own a house as you have to pay for repairs and maintenance

Well it will have been interest & repayment though they may have called it a repayment mortgage - because trust me, the lender will have taken their interest 😂

It's helpful to the people paying high rent that want to get on the property ladder but can't save a deposit due to the high rent and no family help.
But of course "the house always wins" - the lender is a profit-making company, not a charity. They exist to make money.

The asset could lose value or gain value in the short term but it will gain in the long term and it represents security for some people.

Yes they have to pay for repairs and maintenance, that's a downside.

But their mortgage cost will be fixed for 5 years under this scheme, unlike their rent which is likely to go up each year. So eventually the mortgage feels more manageable as time goes on and everything else goes up in price.

£250k at 100%. 5 year fix at 5%. 25 year term.

For the first 5 years, you’ll pay about £1500pcm.

Sure, in 25 years time your house might be worth a £million. Or you know, it definitely won’t.