Hanley Economic Building Society has introduced a new mortgage product allowing first-time buyers to purchase a home without a deposit. The Rent to Own mortgage scheme permits borrowers to access up to £350,000, provided they earn a minimum of £25,000 annually. The loan amount is limited to 133% of the applicant’s current monthly rent, with the UK average rent standing at £1,366 per month. This means potential borrowers could secure a mortgage with monthly payments reaching £1,817. Applicants will undergo standard credit assessments. The fixed interest rate for this product is 5.79% for a five-year term, which is higher compared to deposit-based alternatives in the market.
In contrast, Leek Building Society offers a 4.56% rate for five years with a 5% deposit, while Co-operative Bank provides a 4.5% fixed rate for two years with the same deposit requirement. Mortgage experts caution that opting for a 100% mortgage could expose buyers to negative equity if house prices decline. Ranald Mitchell, Director at Charwin Mortgages, highlights the potential risks and benefits of such schemes, emphasizing the importance of financial discipline for successful homeownership.
Skipton Building Society recently launched its Track Record Mortgage, designed for renters with a one-year history of on-time rent payments. No deposit is required, but applicants must demonstrate a favorable credit history. The monthly mortgage payment for each applicant must not exceed the average of their last six months’ rental costs. Other no-deposit mortgage options exist but typically necessitate a guarantor, such as a family member or friend who owns property and agrees to cover missed mortgage payments.