In a positive step for first-time buyers, lenders are gearing up to offer 100% mortgages, a type of loan that hasn't been available since the global financial crisis in 2008. Skipton Building Society has taken the first step by announcing its plan to launch a mortgage product for first-time buyers who do not have a deposit.
This move could start a new trend in the mortgage sector by making it easier for people to get on the property ladder and thus, boost activity in the housing market.
CEO of Skipton Building Society stated that their new mortgage product is aimed at helping those trapped in paying rent. Borrowers are likely to be required to show a history of paying rent at a similar rate to mortgage repayment for up to two years.
Skipton aims to solve the problem faced by first-time buyers who struggle to save up for the deposit amount required for a mortgage, which is typically around 5%. Skipton is finding a way around this roadblock, and other lenders may follow suit.
Before the financial crisis in 2008, nearly all large lenders offered no-deposit mortgages. Following the crisis, the Financial Conduct Authority (FCA) restricted such lending practices. However, with the lack of affordable mortgage options for first-time buyers, there has been a growing appeal to bring back the 100% mortgage, which the government could see as necessary to help achieve its aim of increasing homeownership.
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