Copy article

100% mortgages

Journalist: Jane Matthews, FTAdviser

ended 11. May 2023

Hello brokers! 

There's obviously been so much talk this week about Skipton's 100% mortgage. Thank you to those of you who shared your views on this already with my colleague Sally Hickey. If you haven't already yet and would like to, please send them my way. In particular, I'd be interesting in hearing your views on if this differs all that much from a 95% mortgage - isn't the negative equity risk similar, yet we haven't seen the same backlash?

I'm also interested to know if you have had many queries about the Skipton product yet and if anyone has made an application yet - have any surprises cropped up?

Finally, although Skipton is the first to bring a product like this back to the market, I understand that there are about 15 other ‘100 per cent mortgages’ available currently that work by utilising some sort of family support. Have you used any of these other schemes - e.g. Vernon BS's Family Assist Mortgage? What has your experience been? And are these other options safer for FTBs? 

Thanks as ever, 

Jane 

 

8 responses from the Newspage community

Copy all

Copy

Editor
Justin Moy
Managing Director at EHF Mortgages
The risk between 95% and 100% LTV mortgages is similar, especially in the current climate. There is always a risk of negative equity when you have little or no deposit, and property prices are moving in the wrong direction. That's the risk, and why the mortgages are that more expensive compared to others.

In the short term, this is about whether you own your home and have control over your situation, or if you rent - and whilst that can be flexible, you could always be a few months away from being evicted.

We have had a handful of enquiries, and everyone so far has not hit the tight criteria of Skipton, but it has opened up the general conversation about other lenders' options, such as the family schemes with Tipton and Barclays, but again the schemes never quite fit the situation. These 100% mortgages are great headline grabbers, but in reality, there will be very few that will qualify to use any of them.
Copy

Editor
Bob Singh
Founder at Chess Mortgages
Since we promoted the launch bout social media has had 650k hits and the phones have been ringing off the hook!
This shows the product concept is a hit but one aspect of the qualification criteria may leave them disappointed ie the mortgage payment cannot exceed the monthly rental they’re paying. This doesn’t allow well to do borrowers who may be staying in cheaper accommodation to save for a deposit quicker as the scheme limits them to a smaller mortgage. We hope to submit a few cases soon.

The other schemes tend not to be as well publicised but do exist and play a part in getting first timers onto the market.

First time buyers need to take expert advice from a broker and not their bank who will not be able to offer the myriad of solutions available in todays marketplace

Some of the schemes we see today I discussed with major players as far back as 2007 but were poo poo’ed as unworkable. My message to lenders is to canvass the views of smart brokers who know the market
Copy

Editor
Chris Barry
Director at Thomas Legal
Most people run a mile at the thought of 100% mortgages given the catastrophic events of 2007/08. Long lines of retail savers queuing outside Northern Rock to withdraw their balances because NR was highly exposed after being one of the market leaders for 125% mortgages.

In reality, the issue was much deeper and was a result of decades of poor credit policy supported by government pressure to ensure everybody in the US had the chance to own their own home at whatever cost.

Since then, the UK has put sensible measures in place to ensure each bank has adequate liquidity and each client is stress tested against a worst-case scenario rise in the future variable rate meaning that even if the client falls into negative equity, they should still be able to afford their mortgage repayments.

This isn't being offered to clients who are financially stretched so I am broadly in support of lenders taking a little more risk to help those struggling to save a deposit whilst paying sky-high rents
Copy

Premium
Ross Boyd
CEO at Dashly.com
We’ll see particular interest in 100% mortgages from first-time buyers looking to get themselves onto the property market. Demand may be high, particularly in the current climate, so lenders offering these will be able to cherry pick the best applicants. They will be looking for professionals, those in stable employment, and will enforce strict affordability limits. But we must also bear in mind that lenders will be asking why a deposit hasn’t been saved and this may influence lending decisions.

These mortgages allow those who wouldn’t normally be able to borrow to get a foot on the property ladder. This will also invariably kick-start the market which is key. But there are disadvantages too – lenders need to consider the potential for negative equity which is a problem if the homeowner wants to sell. We may also find that borrowing rates will be set at a premium and apply to longer fixed terms only.
Copy

Graham Cox
Director at Bridging Hub
I think 100% mortgages are a bad idea at the best of times, a terrible one when house prices are falling.

Whilst Skipton have restricted the mortgage payment to the same level as the borrower's previous rent, what happens if the borrower loses their job or are self-employed and unable to work due to illness or injury?

They could be stuck, unable to pay the mortgage and unable to sell, because the property is worth less than the mortgage balance. This has negative equity written all over it.
Copy

Rob Gill
Managing Director at Altura Mortgage Finance
We've certainly seen an uplift in First Time Buyer enquiries this week, which is no doubt linked to the new 100% Loan to Value mortgage proposition and the press it's received. It's also encouraging that prospective borrowers are contacting brokers for proper, independent advice. This is hugely important for any First Time Buyer, let alone those considering a high LTV product.
Copy

Gary Bush
Financial Adviser at MortgageShop.com
We are seeing an uplift in First Time Buyer activity with all the news coverage of the new Skipton 100% Mortgages. It's true there have been in place for a number of years Family Support Mortgages, a kind of offset of a deposit amount lodged with the lender as security, sadly these mortgages have seen very little interest as the applicant's parents feel uncomfortable with them. The query of the negative equity risk for 100% mortgages isn't that greater than 95% is very true and indeed with the fact that the 100% mortgaged properties will come under undoubtedly greater lender scrutiny alleviates any potential risk.
Copy

Natalie Anderson
Mortgage & Protection Adviser at Connect Mortgages
This product is both innovative and thoughtfully designed, making it an ideal solution for renters who have a decent income but cannot afford to pay a deposit. While it represents a step in the right direction, it is important to note that many renters may not meet the eligibility criteria for this type of mortgage. As such, I eagerly anticipate the development of more options that can cater to a wider range of renters, helping to address the needs of a larger segment of the rental market.