UK mortgage lender to offer first 100% loans since 2008 crisis

theguardian.com:

A leading lender plans to launch a 100% mortgage aimed at would-be first-time buyers who cannot save for a deposit, the first since the 2008 financial crisis.

Standard home loans where the borrower does not have to put down a deposit used to be fairly commonplace but the last was axed in the wake of the financial crisis.

However, Skipton Building Society is getting ready to launch a mortgage targeting those “trapped in rental cycles” and who do not have access to “the bank of mum and dad,” and so are therefore unable to save up enough for a home deposit.

Precise details of how the deal will work have yet to emerge, but according to a report in the Times, the new product will be available up to 100%, and borrowers will need to demonstrate a history of paying rent comparable to mortgage repayments for up to two years, with the deal fixed for more than two years to guard against the risk of falling into negative equity.

Such a mortgage would differ from other niche products available that let people borrow up to 100% of the purchase price, but involve a family member providing financial help of some sort, such as putting up security on the home loan – meaning they are often only be an option available to those with well-off families.

It is understood the deal will be launched in the next few days or weeks.

The move could reopen debate about responsible lending at a time of uncertainty about house prices, and coincides with speculation that the government plans to resurrect the help-to-buy scheme, which closed to new applicants late last year.

Higher house prices and private rents soaring to record highs are just some of the reasons why many would-be buyers are finding saving up a sufficient deposit a bigger challenge than ever.