Copy article

One per cent mortgage plans

Journalist: Anna Sagar, Mortgage Solutions / Specialist Lending Solutions

ended 23. January 2024

Interested in what brokers think about the government's potential plans to introduce 99 per cent mortgage to the market. 

  • Which customers could this support? Is there demand for this kind of product? 
  • Would you recommend a product like this? 
  • What would be the potential risks/downsides of this product be? 

Publishers: if you use any, or all, of the responses in this News Alert, please credit Newspage, e.g. "Speaking to the Newspage news agency, XXXX said...". For ease, all, or individual quotes, can be copied.

15 responses from the Newspage community

Copy all

Copy

Editor
Ross Lacey
Director & Independent Financial Adviser at Fairview Financial Management
We think this could work really well for those who earn a high enough income to support the borrowing amount needed, but because they are currently renting, find it hard to save a sufficient deposit. Lots of potential borrowers will fall into this category where their current mortgage payments will be the same/more than the mortgage they'll take out.

We'd definitely recommend products like this where appropriate, but it'd be important for clients to understand that there's likely to be less competition/choice at this high a LTV, so rates will be higher and at remortgage time, they may find it hard to move to another lender.

For lenders that do offer these products, it would give prospective borrowers more confidence to know that there will be competitive "existing customer" deals they can move onto at the end of the fixed rate period or alternative protections in place to avoid another "mortgage prisoner" situation.
Copy

Editor
Simon Bridgland
Director at Charwin Private Clients
Obviously this is music to the ears of those without a deposit, however extream caution should be excersised by the adopters of such a scheme. Zero room for a drop in property values which could of course happen at some point as sure as the sun will rise again tomorrow. I would be very cautious of recommending a product which will immediately push the user into a position of near negative equity. The market as we all know is strained and so any fool can see it wont take much to cause issues which could trap the buyer for years to come. As well as the potential for negative equity it will also come at a much higher cost each month, with much higher interest rates, placing further pressure on an already strained houshold budget.
Copy

Editor
Craig Fish
Director at Lodestone Mortgages
There is no doubt that this would be of benefit to first time buyers and those who are struggling to save for a deposit when rents are almost unaffordable, but there are other options in the market like the Skipton 100% mortgage that cover this off. The only difference being that this would be government backed.

However, I think this should be avoided at all costs as tinkering of this sort (looking for voters) with the housing market will ultimately lead to probems down the line such as inflated houseprices, making more property unaffordable and potential negative equity.

For once the governemnt should try and do the right thing to solve the UK's housing problem and that is focus on policy to aid more homes to be built.
Copy

Editor
Ken James
Director at Contractor Mortgage Services
Another rabbit in a Hat magic trick, brought to you by the Conservatives in a sad attempt to rejuvinate their popularity amoungst the home buying public.
There will be a massive appetite for this as building a deposit has always been one of the major hurdles for clients. The real issue is that lenders wont be increasing the level of borrowing so they will still be hamstrung when buying, the deposit combined with the lending tended to push their budgets a little further, now with only a 1% deposit required they will in bring down their budget for buying. We as a brokerage will always help clients no matter the deposit, to acquire what in many cases will be the first home. We will ensure that they also understand the issues around negative equity as this could be a real risk for them with such a low level of deposit.

Copy

Premium
Elliott Benson
Owner at Sett Mortgages
This is quite exciting news and good to see some thought being put into ways of helping more people onto the property ladder. I think if we see the same kind of methods put in place as with the Skipton 0% deposit scheme, this could be a good thing for a lot of people!
Copy

Premium
Denni Tyson
Mortgage and Protection Advisor at Henchurch Lane Financial Services
I think Rishi and his pals are very much looking to get another boost into their polls pending one year out from a general election. I think we saw Skiptons approach for the 100% mortgages not being as highly received as first thought. The lenders will no doubt tighten their belts with a product like this with criteria being very specific.

Personally, I can't see it taking off and I don't feel as though many banks/builiding societies are going to buy into a product of this nature. It will effect geographically as to where buyers purchase and may well cause a stimulus in the house market which could topple the progress made to reduce inflation over the last 18 months.
Copy

Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
I can imagine the deal having to have quite a high rate to make the capital usage worthwhile for lenders, just look at the rates that Skipton charge for the Track-Record mortgage as a guide to the margin needed for this type of deal, meaning its reach will be limited as the knock-on impact of the high rate will be affordability issues. I would also imagine that lenders will try to limit in-flows by keeping the criteria very tight; a higher minimum age, employed applicants only, etc.
Copy

Lee Gathercole
Co-Founder at Rebus Financial Services
99% mortgages would be ideal for first-time buyers and there would be huge demand for this type of product. I would assume that this would come with "higher" interest rates and require a clean credit profile as I don't think the banks will be able to handle the demand for this. Some innovation would be needed!

We do have to be careful that we don't push house prices up again it's then a vicious circle as first-time buyers will then struggle to raise the mortgage they require.

Copy

Mark Valentine
Managing Director and Broker at MV Mortgages
This product will of course be aimed at first time buyers looking to take their first steps onto the greasy property ladder. I think there will be a fair deal of demand for the product, especially with the cost of living crisis biting harder than this January's frost!

Recommendations for this product, as ever, would come with likely heavy caveats, the main one being the worrying house price drop off from the main lenders house price indexing, raising the concern of negative equity. I think overall it may be a welcome and encouraging plan to kickstart activity in a pretty stagnant purchase market, but we wait and see the lenders appetite for this, which will be revealed when we receive their rates for these products. I would be surprised if we see any 99% LTV products under 6%.

Anything to kickstart the market has to be a good thing though, right?!?!
Copy

James Bull
Mortgage Broker at JB Mortgages
I feel that if the government were to back a mortgage product with a 1% deposit this would be a great success. Due to the rising cost of living and ever higher rental costs, many people are stuggling to save for a deposit so buying a home is out of reach for them. But although they cannot save for a deposit, they are managing to pay their bills just fine and on time. These people are perfect for a scheme such as this and i believe it would be very popular.
Copy

Gary Bush
Financial Adviser at MortgageShop.com
The latest government meddling in the UK property and mortgage market isn't well received by financial advisers who have grown their teeth in the industry. Lenders operating already in the higher loan amount arena are already doing a good job to assist First-Time-Buyers and there is more to follow right up to 100% soon it seems. 99% mortgages are great to assist first-time buyers but without the very much needed drastic increase in "affordable homes" how is this going to make affordability not a concern, it's a little like the Help to Buy scheme and attempt to paper over the cracks. The devil is in the detail of this latest scheme and we await a chance to properly scrutinise the full details before committing ourselves to a real opinion.
Copy

Rhys Schofield
Brand Director at Peak Mortgages and Protection
I think it's a fantastic idea. With little prospect of normal families stuck in the rent cycle being able to save a deposit, helping them onto the ladder is welcome. That being said, we need to address the wider supply and demand issues in the market with a joined up plan to provide enough housing in the first place or else it just throws more fuel on the ever increasing house price fire.
Copy

Peter Stokes
Director of Mortgages at Davidson Deem
I do wonder if this would really help? I appreciate that many first time buyers are struggling to save for a deposit, especially if they are renting, but the real problem is property prices. Most first time buyers simply don't earn enough to qualify for the mortgage required to buy a property, whether that be with a 5% or 1% deposit.
The pricing of these rates will also be very interesting. They are likely to be higher due to their risk, meaning the stress tested affordability will be stricter. The end result coiuld well be that depsite requiring a smaller deposit, the amount a lender will lend will be less, meaning any benefit is lost.
The only real way to help first time buyers is building more properties with asistance such as help to buy and the like.
Copy

Alastair Hoyne
CEO, Finanze Capital at Finanze Capital
Although the 1% and 0% deposits sound great, I feel they are just bait. The people who cannot afford to save for a deposit are unlikely to pass the affordability calculations from the lender at 99-100% LTV as I assume the lender will hike up the rates to cover their risk. The chance for negative equity is so high and it's being put on those most vulnerable and exposed. You have to question the ethics and the wisdom of this move.
Copy

Robert Timm
Managing Director at Sunland Mortgages
There should always be encouragement for schemes which can help first time buyers onto the property ladder, and this would support buyers who have maybe been paying high rents for many years but unable to save a deposit on top.

There are some negatives though, not least around house prices. If prices were to drop, it could leave buyers on this scheme in negative equity. It could also contribute to inflated house prices due to lack of available housing already, let alone introducing a product which could see thousands more buyers able to buy for the first time.