Skipton launches 100% LTV 'track record' mortgage
Following the news Skipton has launched a 100% LTV ‘track record’ mortgage, free PR platform and newswire, Newspage®, asked brokers for their views. They can be seen below.
Copy article
22 responses from the Newspage communityCopy all
Copy all
Star Quote
Copy
This is exactly the news first-time buyers needed. While many people will have flashbacks to the Northern Rock days, we all know that back then mortgages were handed out like sweets. Today, underwriting is much more in-depth with affordability checks also far more robust. For those stuck renting with rising costs, it can feel like an uphill battle trying to save, so Skipton launching this is exactly what the market needed. Whilst the fear of negative equity will need to be discussed, given that this is a 5-year product it will encourage people to not look at this as a short-term option, which will ensure the house value has a reasonable amount of time to grow to build equity.
Star Quote
Copy
Providing an option for rent-trapped clients can only be a positive move in the current market. With the exponential rise in rents, it will give some deposit-strapped tenants the option to seriously look at the opportunity to purchase a property. It makes perfect sense if the level of the mortgage payment is below their current rental commitment and they have a proven track record. It also provides a real alternative to shared ownership that has its disadvantages and still incurs a monthly rental. Skipton will no doubt apply some tough affordability tests to any application, as has been the case with the 95% level of borrowing. It remains to be seen if other lenders look to follow suit. Providing advisers with a range of solutions is crucial in a tougher landscape.
Star Quote
Copy
As long as borrowers can prove they can afford the payments, I think this is a good thing for the market. Hats off to Skipton Building Society for daring to be different. I would expect and hope that more lenders will follow suit.
Copy
Kudos to Skipton Building Society for its trailblazing initiative in introducing a product that truly stands out. This is a breath of fresh air in the face of today's economic challenges. It seems the market has been eagerly anticipating a game-changing innovation not only since last September but 2008, and Skipton may have just delivered the masterstroke we've all been waiting for. Given the substantial risks involved with 100% mortgages, we can only expect that Skipton will be meticulously scrutinising applications to ensure it strikes the right balance between risk and reward.
Copy
This is welcome news for first-time buyers, although without seeing the full details it's hard to assess how many people this will benefit. Skipton is one of the few lenders who look to actually help people with some great criteria already in place. However, launching this in a market where house prices could fall further is a concern and means that, as advisers, we will need to make sure clients understand the risk of negative equity very clearly. But for the right property in the right place, this is just what is needed for some borrowers. For a client early in their career with the potential for progression and able to overpay as they get pay rises, this could be great.
Copy
This is good news and certainly something we'd recommend where appropriate. Borrowers would still need to meet the affordability tests and be mindful of the increased likelihood of falling into negative equity. Something we'd like to see from any lenders who decide to offer 100% mortgages are also product options that borrowers can fall back onto at remortgage time. This can provide a safety net to help borrowers avoid being forced to move onto the standard variable rate if they are remortgaging at a time that coincides with being in negative equity.
Copy
This is a brave move by a lender as the housing market is on shaky ground. With a gap in the market, not being serviced by anyone else, this could pay off. Rates are competitive, and if inflation falls away, the economy could shore up and the housing market rise next year, ensuring equity in the properties and reducing their risk. It’s not clear yet just how squeaky clean your credit score needs to be to get one of these mortgages, but it’s likely that Skipton will be super-selective.
Copy
This is a really bold statement from Skipton about the current property and mortgage market. This move suggests the potential for property prices falling any further in the long term is relatively small, whilst the use of a 5-year fixed deal may be a way to smooth out any immediate issues with the longer-term gains typically delivered by property. Specific to the current rental market, this will be an ideal solution for those on high monthly rents and limited savings opportunities. Let's not forget this will be quite a niche product, as are the other 100% schemes currently available in the market, but what this does is give some greatly needed confidence to the housing market, and is another opportunity to help people get on the property ladder. Full marks to the Skipton.
Copy
Many people with aspirations to own a property will be given hope they can finally get out of the rental market with this new mortgage. With a shortage of properties and increasing rents, even a 5.49% rate seems like good value. If this product is a success other banks and building societies will be keen to bring out similar products especially at a time when lenders are not issuing as many mortgages as they would like to be and purchase transactions are down.
Copy
A decent rate for a decent product that will help those who need it the most, namely those that can't afford to save for a deposit because of the high rents that they have to pay. I suspect we now may start to see a few more lenders offering similar products, which will be a great stimulus for the lower rungs of the property ladder. Not sure of the effect that this will have on the rental market but suspect that we may see a few more landlords exit the market. What the uptake of the product will be like remains to be seen, and I suspect if it proves to be too popular, we may well quickly see the product withdrawn, or tailored to limit exposure.
Copy
This is exciting news for the mortgage world and for renters unable to save a deposit. The criteria don’t seem unachievable so it looks like this innovative product may shake up the playing field and encourage more lenders to follow suit. The only disclaimer that I would really drive home to applicants is there could be a good chance of negative equity if house prices fall, as predicted Aside from that, bring it on.
Copy
It seems that the gap between the haves and the have-nots is increasing, especially when it comes to getting onto the housing ladder. There are many potential buyers who have proved they can afford to pay rent at the current high levels, but just do not have the means to meet ever-increasing deposit levels and feel constantly at the mercy of rising rents. Whilst I have had some concerns in the past, the time now seems right for a new type of 100% mortgage, one that is underwritten prudently and where affordability is carefully taken into account. The Skipton product is different to those of yesteryear, and whilst it will not be suitable for everyone, it will help some of the new generation of home buyers get off the rental treadmill and enjoy the security of owning a home. It is important that we recognise also the need to change our thinking that property is a short-term investment, and realise it is a long-term home for us to build our memories in.
Copy
The idea of a 100% mortgage seems oddly timed while there is such uncertainty around the outlook for the housing market and what will happen with house prices. Although many will have flashbacks to the 100% mortgages available back in 2008, we are sure that the criteria for this product will be far tighter around credit history and affordability than historic versions.
Copy
Skipton delivering a massive shot into the arm of the mortgage market is fantastic news. With rents increasing, it is going to be harder and harder for first-time buyers to save for deposits, and this is now going to give them the opportunity to get onto the housing ladder. I am looking forward to seeing the criteria for this and imagine there will be a number of restrictions and a high credit score to pass. But even if it only helps 10% of renters, that is a step forward in a challenging market.
Copy
I'm amazed the Prudential Regulation Authority has given Skipton the go-ahead to launch this product. It's like we've learnt nothing from the Global Financial Crisis in 2008. I understand the logic of trying to help those who are rent-trapped, and unable to save for a deposit, but to me it's addressing the symptom rather than the cause, which is that house prices are too high. The grave danger is borrowers will overextend themselves. The slightest fall in house prices, and I believe they'll fall significantly over the next 12-18 months. will leave homeowners in negative equity, with the property worth less than the mortgage balance. Not a great place to be if your income drops and you need to sell.
Copy
The market has needed something like this for a long time. It’s perhaps slightly peculiar timing with so many concerned about house prices dropping, but clearly Skipton aren’t too worried or they’d have delayed the launch. It will be interesting to discover just how tight the scoring will be, and how many people actually get their application agreed.
Copy
Congratulations to Skipton Building Society for their bold and innovative plans to launch a 100% mortgage. Not all borrowers have the luxury of the 'bank of mum and dad', and family or friends who can assist them with a contribution towards the deposit. It will certainly help 'generation rent' finally get onto the property ladder. Renters face a big challenge when they want to transition between renting and buying their own home and this product with finally bridge the gap. Whilst the finer details of the new product have not yet been announced I would hazard a guess to say that Skipton will have in place robust procedures to ensure that the mortgage will be affordable for the entire term of the mortgage and borrowers do not end up in negative equity. I expect demand for this product will be high and other lenders will be watching this space very closely and may launch a similar offering in the days and weeks ahead.
Copy
We've always referred to Skipton as the 'people's champ' in our office and their being the first lender to offer a true bona fide 100% mortgage is further proof. That said, given the current market uncertainty and the fact that 'full details' have not been revealed, it makes me think there could be some sort of catch. My guess is there will be something to give Skipton some extra security. This could be a linked 'forced savings plan', which is assigned to Skipton, until the LTV drops below a certain level, or using a landlord discount to get the LTV below 95% from the get-go, without any physical deposit being required. For now, would-be borrowers and brokers are keeping their eyes very much peeled.
Copy
With first-time buyers continuing to struggle in the face of sky-high property prices, 100% mortgages may be an idea whose time has come back. The housing market needs innovative solutions and it's great to see Skipton Building Society, with a sensible approach to affordability and credit score while targeting tenants with a good track record of meeting rental payments, looking to give first-time buyers a much needed boost.
Copy
Hallelujah. Something to break the cycle of clients who can clearly support eye-watering rents each month yet as a result have limited capacity to save for a deposit. I have to take my hat off to Skipton for using common sense and doing something the market has been clamouring for.
Copy
What a way to shake up the market introducing this bad boy. It’s super exciting what this means for first-time buyers who have previously tried to get on the property ladder. It now gives people an opportunity where they wouldn’t have had one previously.
Copy
For first-time buyers, this is great news. They've been struggling to save for a deposit for years, and now they might not have to. Of course, the lending criteria will still be strict, but that's a good thing - we don't want a repeat of the past. Almost 15 years since 100% mortgages were last available, the possibility of these resurfacing in the UK residential property market should be welcomed and greeted with a sense of cautious optimism of a clear sign of confidence and stability in the banking system and the robustness of the UK property market as a whole. While previous instances of such lending were associated with reckless practices, a more sensible and holistic approach is now regulated for and expected. Of course, we can't forget the lessons of the past. Smart lending and careful assessment are key to making this work. But, it's great to see Skipton leading the way with innovative ideas. Let's see who follows suit.