MortgagesMay 12 2023

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

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Brokers: huge interest in 100% mortgage but few will qualify
Brokers say the 100% product will better suit the needs of higher earners

Brokers have seen a big uptick in enquiries from first-time buyers following the return of a deposit-free mortgage, but they warn few buyers will be able to meet the strict criteria.

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.