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?

Anyway, 100% mortgages might feel like an olive branch, but they are not the solution to the housing crisis in this country.

Not at all.

It's basically a niche product that will help some FTBs but that's all.

Personally I think just as much help would be bringing back self declares on 80% ltv. For self employed/ contractors/freelancers. There are an awful lot of self employed people like ourselves who would struggle to get mortgages- especially when over45 - given the amount of stuff you can offset when self employed income can look quite a bit lower on paper than it actually is. Criteria being self employed for at least 3 years and 15% deposit and rent payments equal to or higher than mortgage. In our case we would have the deposit- we just wouldn't get the mortgage in our late 50s at the level we would need it in our preferred areas.

That's funny. You choose to offset loads of stuff so it looks on paper like you are earning less than you are - to save tax. Many self employed people like to get paid in cash for the same reason.

Then you complain that because you officially earn less than you actually do, it stops you getting the mortgage you want.

I think for individuals paying rents that are considerably higher than a mortgage would be, this could help.
I also think it could reduce the number of BTLs, as people who would prefer to own than to rent wouldn't pay more in rent than they would for a mortgage which is currently a huge problem. So possibly more property up for sale.
But it would drive up house prices even further as more people come into a position to buy, so the benefit would be short-lived while the market adjusted.

These are very close to the figures I had when I bought my 2 bed house. And rent for the same was £650 at the time. It’s now £850 for the rent and my mortgage is closer to £1k but at the beginning of getting on the property ladder it can be crippling.

I think it's only a problem when you NEED to sell.
If you want to sell, that's fine - you take that into account - you may be downsizing, moving to a less expensive area and can afford to take the hit. Or of course if you're income has increased, you've inherited etc.

But if you need to sell - if you've dropped income, interest rates have risen more than you can afford, family expenditure have risen unexpectedly (unplanned child /multiple birth) and you can no longer afford your repayments. Then negative equity is a huge problem.

No, because in many areas the lower/average paid workers won't be able to afford the mortgage payments.

Our rent is £900 a month (well below market rate as we've been here over a decade and the house is very tatty) on a 3 bedroom house worth £300k that needs (conservatively) £50k of work doing.
According to the Skipton 100% thing we could borrow £150k. Lucky to get a 1 bed flat here for that and we've 3 DCs.

We're relocating next year to an area where we can buy a £200-250k 4 bedroom house on our average salaries of £30k each (with a 5-10% deposit). But due to interest rates, we'll be paying a lot more a month in mortgage payments than the equivalent house would cost to rent. Our affordability has already dropped in terms of what we could afford to repay, regardless of the income multiple rules, because a few % interest makes a huge difference.

The borrow rate is really low. We can borrow £260K on £1480 rent which wont even get us a flat in this area, but we could consider moving a bit more out to get more for the money and then just pay more in train fares to get back to the city.

Again, this is a compromise that may be worth it to get on the property ladder. It seems annoying but it's only your first property, not forever.

How are people on a 100% mortgage supposed to find the disposable income to get all the work done? Trade rates and material rates are through the roof at the moment.

They don't have to do the work in year 1 do they? Wait until they do have some spare cash through salary increases/bonuses etc. The mortgage amount will stay the same for 5 years, but salaries won't.

So true. And we would have more than enough money to use on renovations/repairs,

How many extra houses will be built as a result? I'd guess none.

I think if the rent you pay is the same as the mortgage it is worth doing as you are paying down the mortgage each year. When you sell you effectively owe less and that doesn't happen with rent. We recently bought and prior to that we had paid £412k in rent. We couldn't re mortgage after the crash of 2008/2009 and we had to sell and rent. It ruined our children's childhoods as each house was put of for sale each year in the spring. Our furnishings were used to 'stage' the house. We moved 9 times. We couldn't save a big enough deposit with high rents and we became older so the terms were progressively unattractive. I would rather eat beans than rent again.