Skipton BS’s no deposit mortgage – How is it different?

The mortgage differs from the competition by negating the need for a guarantor. 

Yesterday Skipton BS launched a deposit-free mortgage aimed at renters looking to join the property ladder. These types of mortgages already exist, but Skipton BS’s deal is the only one on the market which does not require a guarantor.

Charlotte Harrison, CEO of Home Financing at Skipton BS, said that there is a current gap in the market for renters who have a strong history of paying their bills on time but cannot afford the deposit on a home of their own.

“It is time for a re-think on these massive barriers to homeownership, and we’re proud to take the lead on bringing to the market solutions for such a massive social problem,” she said.

To be eligible for this mortgage, interested borrowers need to be:

• A first-time buyer
• Aged 21 or older
• A minimum 12 months’ good rental history
• The monthly mortgage repayments cannot exceed the average rental costs over the past six months.

There are currently 15 other mortgage products at a maximum loan-to-value (LTV) ratio of 100%.

While these are predominantly offered by local banks and building societies, high street lenders Barclays and Halifax have similar versions of this mortgage.

Both lenders require the first-time buyer to find a “helper” or “family member”, essentially someone who is willing to put up a 10% deposit on the home.

This deposit is then locked away over a fixed term and, provided the first-time buyer keeps up with their repayments, is returned to the “helper” or “family member” with interest.

This means eventually the first-time buyer would have paid off the entire value of their home, plus the interest charged.

Skipton BS’s announcement came at a time when Halifax, the UK’s largest mortgage lender, reported a fall in house prices. Kim Kinnaird, Director of Mortgages at Halifax, said that this decline will likely continue for the rest of the year.

The average UK property now costs £995 less than it did in March.

A further decline in house prices could see an increase in demand for homes, but only if it is an affordable option for would-be buyers.

So, while innovative ways to help people towards homeownership are welcome, the key to affordable housing lies in its supply, according to Rachel Springall, Finance Expert at Moneyfactscompare.

“There are very few 100% LTV mortgages in the market, but even if we were to see more innovative deals surface, affordable housing is very much in short supply, and there needs to be significant changes to the market to turn this around,” she said.