Copy article

100% Mortgages - solving one problem, or creating new ones?

Journalist: Emma Simon, Mortgage Strategy

ended 19. May 2023

I am writing the cover feature for Mortgage Strategy on 100% mortgages - obviously pegged on the new deal from Skipton BS, which has received a lot of national coverage. 

I'm looking for any comment from brokers/ intermediaries on the issue - particularly addressing the following areas: 

  1. Do 100% mortgages solve the main problem of affordability in the market at present, particularly for first-time buyers? Or will this still going to be a problem given the  affordability criteria people need to meet - particularly in relation to testing against higher interest rate scenarios.
  2. How concerned are you that this is creating potential new problems (eg negative equity/ repayment issues) rather than solving current ones (eg difficulty saving a deposit given runaway rents). Are there better ways to solve current problems in market? 
  3. There has been a huge amount of publicity/ hype around Skipton's 100% mortgage - but are there other products that are meeting this need - but perhaps not garnering quite as many headlines? Eg the various family assist mortgages.  What other sort of products would brokers/ advisers be looking at in the first-time buyer market? 
  4. Do other mortgage products take into account an individual's track record of meeting rental payments as part of their affordability criteria -- is that what is the key attraction for some borrowers, rather than the deposit-free aspect. 
  5. Are other lenders following Skipton's lead in offering a deposit free mortgage? Do you expect to see more on the market in coming months? Has there been an increase in mortgages with relatively small deposits - eg loans at 95% LTV?
  6. Is there increased regulation around affordability for those borrowing with low or no deposits - or do the same mortgage market rules apply? Do you think there should be increased regulation for affordability around deposit-free mortgages? 

    Many thanks - if I could get any comments by the end of this week - May 19th that would be really appreciated - but if some come in next Monday (May 22nd) should be able to squeeze a few extra ones in. 



 

7 responses from the Newspage community

Copy all

Copy

Editor
Rohit Kohli
Director at The Mortgage Stop
While the introduction of products aimed at assisting first-time buyers is a positive development, it's not a panacea for the challenges they face. The timing of Skipton's 100% mortgage, for instance, coincides with rising interest rates and a dip in property values, increasing the risk of negative equity. With consumer duty weeks away, it's crucial to ensure that proper checks and balances are in place. If not, we might be setting the stage for a wave of legal issues reminiscent of PPI. There are other solutions available that mitigate these risks, but they often depend on support from family, which isn't an option for everyone. Skipton's offer, while appealing, is limited by the rent paid. So in certain areas, the mortgage amount might not be enough to purchase the kind of property the borrower is currently renting. In my view, the market needs a diverse range of solutions to truly address the issues. The goal should be to create a suite of options that cater to a variety of needs.
Copy

Editor
Aaron Strutt
Product and Communications Director at Trinity Financial
We are going to need more focused first-time buyer products to come into the market again to help younger borrowers get on the property ladder.

One pretty niche 100% loan-to-value product is unlikely to be a complete game changer. Although other lenders will be looking at Skipton's rate and working out if they should be entering this market.

Skipton has generated an incredible amount of press coverage coming back into the no-deposit sector after such a long time and it is a brave move. It really shows how much we need innovation in our sector and what positive news can do. Unfortunately, we are getting too used to fixed rates going up and the Bank of England hiking the cost of borrowing.

Skipton's acceptance criteria seems to be sensible especially as it is targeting renters and many of them are desperate to own a property.
Copy

Editor
Justin Moy
Managing Director at EHF Mortgages
100% mortgages don't improve the affordabilty, infact borrowers will be borrowing less, to mitigate the risk of little or no deposit. What the 100% mortgages do allow those struggling to save a deposit, perhaps due to high rent costs, to buy their first home. Skipton BS product tries to match affordabilty and the current rent costs to the mortgage payment, which has been more beneficial to those living in less expensive areas.

Parental help has consistently been the way many have managed to get into ownership, with a gifted deposit by far the most popular route. There are a number of Family Assist mortgage products that allow parents to either offer some collateral, such as their homes or cash savings to the lender, or even parents featuring on the mortgage application, which boosts the overall affordability. These schemes are normally available from Brokers who will check suitability and criteria. These can be ideal for First Time Buyers.
Copy

Gary Bush
Financial Adviser at MortgageShop.com
100% mortgages need to come back to market for one reason alone, there are a number of buyers stuck in a rental home that can ill afford the deposit for a property purchase. Such mortgages don't offer any new answers to the overall affordability problems first-time buyers can suffer. I see no new risk of negative equity with the Skipton 100% mortgage - in the longer term the UK property market has proven itself as robust. We have been using 2 lenders 100% mortgages for shared ownership properties for 10 years+ and have found this a great way for home hunters to get themselves on the first rung of the property market - a lot of these buyers have left the shared schemes behind now and have sizeable equity in a non shared home now, all made possible by these 100% mortgages. We see no less reason to advise clients to arrange a Skipton rental assessment 100% mortgage - it's another great string to our bow. Now that we have this positive movement from Skipton we would expect others to follow
Copy

Rhys Schofield
Brand Director at Peak Mortgages and Protection
Let's be honest about this. Just making mortgages easier to get for some people won't solve the root cause of so many woes in the market, the fact we don't have enough houses, and we're not building enough. Until that beast is tackled it's all just tinkering around the edges.
Copy

Mark Stallard
Director and Advisor at House and Holiday Home Mortgages
100% mortgages aren’t solving affordability. But they do help a few long-term renters get on the housing ladder -- and that’s a good thing.
Remember, Skipton wasn’t trying to solve the housing crisis, just help those paying high rent who couldn't save for a deposit.
There are many ideas out there but house prices are too high for lots of first-time buyers.
This isn’t a lender problem. Lenders have to lend within people’s capacity to pay. The wider issue is we need to use technology to make housing available to everyone.
If all lenders’ algorithms had built-in reliable rental payments things would change. We're not seeing others like this, but expect lenders will bring in variants.
As for affordability, we’re overregulated. We need fresh ideas and a new twenty-first-century approach. Essentially, the biggest obstacle is supply and demand… leading to an upward spiral of prices against stagnant wage rises in general.
Copy

Graham Cox
Director at Bridging Hub
Skipton's 100% mortgage product is a sticking plaster on a gangrenous leg. Another futile attempt to address the symptom rather than the underlying cause, that rents and house prices are too high. Ironically, it will exacerbate the problem it's attempting to solve. Just like Help to Buy pushed up new build property prices, thereby reducing affordability.