Brokers: huge interest in 100% mortgage but few will qualify

The 100 per cent mortgage from Skipton Building Society, targeted specifically at renters, was met with huge excitement earlier this week by brokers and potential borrowers a-like.

The phones have been ringing off the hook — Bob Singh, Chess Mortgages

The buzz about the product spread to Instagram and TikTok, with videos about the launch of the 100 per cent deposit product receiving thousands of likes from individuals wanting home-ownership. 

The product is the first such mortgage to return to the market in over 15 years following the 2008 financial collapse when thousands of borrowers were trapped in negative equity as a result of plummeting house prices.

But this time, Skipton has said the product is different and safer for borrowers given its attached affordability criteria.

Owner of broker Chess Mortgages, Bob Singh told FTAdviser that his firm has been deluged with interest from first-time buyers this week. 

“Since we promoted the launch our social media has had 650,000 hits and the phones have been ringing off the hook,” Singh said. 

“This shows the product concept is a hit,” he added. 

However, Singh noted that borrowers may be left disappointed given that the monthly mortgage repayments cannot exceed the average monthly rent they have been paying in the past six months. 

“This doesn’t allow well to do borrowers who may be staying in cheaper accommodation to save for a deposit quicker as the scheme limits them to a smaller mortgage,” Singh said, adding that he is hoping to submit a few case applications soon.

Better suited to better off

Likewise, Chris Sykes, technical director at London-based broker Private Finance said although the product is a “brilliant innovation”, it will only act as a solution to a small proportion of renters. 

“Some renters will be better off staying in cheaper rental accommodation and saving up for a deposit to buy at a lower loan-to-value in the future.”

“Taking out a 100 per cent loan-to-value mortgage may make more sense if you are staying in an expensive rental property, perhaps if you have a family and require more bedrooms,” Sykes said.

Sykes also noted that prospective borrowers will need to consider other costs like stamp duty and legal costs but said borrowers who do use this product may be able to refinance and switch to a better product at a lower loan-to-value at the end of the fixed-term.

Other mortgage lenders were supportive of Skipton’s launch this week too.

Peter Dockar, the chief commercial officer of specialist lender Gen H, said that “this is a really exciting time”. 

“Innovation and unlocking homeownership for more people has always been at the core of what we do at Gen H, so we’re delighted to see other lenders moving the dial and finding new ways to help more people,” he said. 

Similar to Sykes, Dockar noted that 100 per cent mortgages will be better suited to those with above average incomes for their region.

“This is because most lenders will only lend up to five times loan-to-income. But currently, the cost of a home in the UK is running at approximately eight times the average person’s income, and more like 13 times in London,” Docker explained.

“Historically, these types of customers are already positioned to accumulate a deposit and weather downturns better, as higher earners tend to have greater financial resilience.

“Of course, banks will run extensive affordability checks on any prospective borrowers, meaning the lender will be confident in the buyer's ability to pay the mortgage,” Docker said. 

He added: “I’m hopeful that 100 per cent mortgages will help more people onto the ladder.”

jane.matthews@ft.com