Zero per cent mortgages - yes or no?

This is going to make a lot of first time buyers very happy, I speak to many clients who are struggling to save a deposit but are able to make rent payments every month which are in most cases higher than a mortgage.

As long as the client is getting appropriate advice and affordability checks are done correctly I think this could be a very popular product

Skipton has launched what renters have been demanding for years, a mortgage that takes into account that they have been paying higher rent higher than a mortgage for years.

The rental affordability test demolishes affordability concerns I've read by critics.

We don't know what the future holds for house prices, so negative equity remains a concern. Except if Skipton stands by existing customers not forcing them onto SVR but offering them market rates as they repay the debt. I have little concern, a great product to help people get out of renting.

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 targetting tenants with a good track record of meeting rental payments, looking to give first-time buyers a fighting chance, albeit with strict affordability criteria. Skipton's Track Record Calculator, which calculates the max loan based on rent paid by the potential borrower, shows that to borrow the maximum of £600k, the borrower needs to have been paying rent of £3,219 pcm. That equates to a rental yield of 6.44%. In London at least, yields are currently closer to 4%, meaning many borrowers won't get close to achieving a 100% mortgage. Indeed, a yield of 4%, or rent of £2,000 pcm on the same property, gives a maximum loan amount of £372,883, just 62.1% loan to value.

If you're trapped in the rental cycle, easily covering your rent but don't have the leftover cash to save for a deposit that's not an ideal position to be in. For the right borrower, getting the help to get onto the ladder is a masterstroke. I'd expect other lenders to follow Skipton's lead.

A 100% mortgage is not, and never was, an inherently bad idea. After all, not a lot changes in the grand scheme of things if you are putting in a 5% deposit on a property in terms of the risks for the lender or the borrower. As long as 100% mortgages are tightly controlled, with robust underwriting and correctly priced to reflect both the risk and the capital-hungry nature of such loans for the lender then they have their place.

100% mortgages are music to our ears here at Mortgage Shop. As a company, we have had access to two lenders offering 100% mortgages for shared-ownership property transactions for the past 10 years, we have the proof at hand of the benefit that this kind of borrowing can have for first-time buyers. It's a big signal that the brains at Skipton, for all purchases, now agree with us that, although we could be in a corrective period for property values, the medium to long-term outlook is only one way, and that's upwards. It's a clear fact that with a shortage of properties to purchase still being the case across the UK, the price of these properties will increase in time, alleviating the potential risk to negative equity occurring. Obviously, Skipton could possibly ramp up its surveyor requirements for the property valuations for these 0% deposit schemes to check that the property stock being included isn't low quality and not in need of substantial improvement for a potential resale.

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.

Skipton will have in place robust procedures to ensure that the mortgage will be affordable for the entire term of the mortgage and that 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.

Good: Gives opportunities for people that have the affordability but had difficulties saving to purchase a property.
Good: More buyers looking, if they don't qualify for 100%, does this mean conversations with family to get to 5% deposit or give the motivation to save quicker?
Good: The Skipton calculation for the rent is going to be more towards the lower end of the market, flats and 2 bedroom properties which means potentially more properties to the market and those people looking to upsize.
Negative: Potential negative equity, but the 5 year fixed lends it to you building your equity over that time.

No such thing as a bad mortgage - just one that was poorly advised. 100% mortgages or even 100% plus mortgages are not in themselves a bad idea. What is a bad idea, is to give them to people who are already heavily in debt or who are borrowing up to their maximum monthly level of affordability. Having a massive debt is not a problem (ask Italy and the US), if you can afford to service that debt. The problems arise when the cost of that debt exceeds your ability to pay it.
100% mortgages also carry the negative equity risk but then they should not be aimed at people likely to move in the near future. If sold correctly they offer a partial solution to the far more serious rental trap that many find themselves in.

Hopefully, the lessons of 2008 have been learnt well and mortgage lenders will continue to focus on affordability.