Martin Lewis gives his verdict on Skipton Building Society’s new 100 per cent mortgage scheme
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Martin Lewis has shared his verdict on a new zero deposit mortgage that has been launched to help first-time buyers trapped in a renting cycle get on the property ladder. In the latest episode of the Martin Lewis Podcast, the consumer champion explained how Skipton Building Society’s new 100 per cent mortgage, which was launched this week, works.
The Track Record Mortgage is available to tenants aged 21 and above and for first-time purchases only. The five-year fixed offer, which is available to borrowers needing a 100% loan, is fixed at 5.49 per cent.
Speaking on the podcast, Mr Lewis said: “It’s the first one of the 100 per cent mortgages that don’t require a guarantor’s backing. The others have had you had usually your parents or somebody put some money in so that you’re able to get a mortgage of this level.
“Now the big key to this, and it’s only open for first-time buyers aged 21 or above, is that normally when you apply for a mortgage, the maximum amount you can borrow is based on income and outgoings and the lender’s specific arbitrary affordability calculations.
“Typically, it’s roughly your salary multiplied by four or four and a half with a lot of other things in. But with Skipton’s 100 per cent mortgage, the amount you can borrow is not allowed to be more than the equivalent of what you pay in each month in rent.
“In other words, if you pay £1,000 a month on rent, you’re Skipton 100 per cent mortgage couldn’t cost you more than the equivalent of £1,000 a month either.”
The mortgage was launched after Skipton’s own research revealed that 80 per cent of tenants feel “trapped” in the rental cycle as they pay rents that are higher than a mortgage. But Mr Lewis said this mortgage instead aims to solve the issue of renters not being able to save up enough cash for a deposit.
The Money Saving Expert founder said: “As someone who’s campaigned for years to help mortgage prisoners locked in at hideous unaffordable rates, I have to say that when I first heard the spectre of 100 per cent mortgages were turning did leave me with somewhat mixed feelings.
“Years of property pawn TV shows have spouted the idea that you’ve got to buy a house as soon as possible - it has to be as big as possible, you got to push as hard as possible. Whereas for me the real priority is not to overstretch your finances.
“Before the 2007 Financial Crisis, banks would usually chuck money out to anyone walking past their window to get a mortgage. So for me, Skipton’s criteria of requiring a good rental track record to prove someone can make mortgage payments is sensible.
“But you’ll still get a far cheaper mortgage rate if you find enough money to scrape together for a deposit.”
What is a 100 per cent mortgage?
A 10 per cent mortgage helps those struggling to raise enough cash for a deposit to get on the property ladder. This means buyers can purchase a home without paying a deposit - but they can come with extra fees.
Most mortgage deals require the buyer to put down at least a 5 per cent deposit. And since the recession in 2008, lenders have become a lot stricter when it comes to offering 100 per cent mortgages.