It’s simply over six weeks since April Mortgages launched its 100% mortgage, adopted carefully by Gable Mortgages’ 0% deposit house mortgage. These new merchandise have clearly “caught the eye of the market”.
And, whereas any innovation that helps get extra patrons on the housing ladder is broadly welcomed, there are nonetheless challenges for these hoping to entry these merchandise and additional ingenuity from lenders is named for.
Gable Mortgages launched two 0% deposit five-year deals for first- or next-time patrons, whereas April Mortgages has a 100% loan-to-value mortgage obtainable at as much as 4.49 occasions revenue on 10- and 15-year mounted phrases.
Big banks will watch from the sidelines whereas smaller lenders and constructing societies
check the waters
Mortgages that require no deposit are unusual, with most lenders requiring debtors to deposit not less than 5% of their buy.
My Mortgage Angel mortgage and safety adviser Sam Lindsay says the return of 100% LTV mortgages is “an awesome step ahead”.
She explains: “These merchandise will allow extra individuals to get transferring — as they solely want to avoid wasting for stamp obligation, authorized charges and transferring prices — and, in flip, will open up the property market and generate some momentum to get chains transferring.”
According to John Charcol mortgage technical supervisor Nicholas Mendes, these merchandise have “caught the eye of the market, and understandably so”.
Mendes suggests the loans supply a “lifeline to first-time patrons who’re caught on the rental treadmill, unable to avoid wasting for a deposit regardless of persistently demonstrating that they’ll afford a excessive month-to-month lease”.
He provides: “In concept, it makes absolute sense. If somebody has reliably paid lease for years, typically at a degree greater than a typical mortgage compensation, why ought to the shortage of a deposit bar them from homeownership?”
The conventional fashions simply aren’t slicing it for lots of would-be patrons anymore
Products reminiscent of Skipton’s Track Record mortgage “have benefit”, believes Mendes.
“They are designed with guardrails in place, utilizing a borrower’s rental historical past to show affordability, which is a smart evolution of the standard lending mannequin.”
However, 100% LTV mortgages are usually not with out their challenges and there are some who shall be involved that the market is returning to a pre-credit crunch state.
L&C Mortgages affiliate director of communications David Hollingworth says pre-2008 there have been quite a lot of deals that enabled patrons to buy with out having any ‘pores and skin within the recreation’.
He says: “There isn’t any query {that a} 100% LTV deal will go away the borrower extra susceptible to falling costs and probably unfavourable fairness. If there’s a have to promote and costs have fallen, there’s a larger probability of unfavourable fairness and probably crystallising a loss.
“Often, first-time patrons will want an even bigger deposit as a result of they’ll’t borrow sufficient to satisfy the acquisition worth. A much bigger deposit could also be required to bridge that hole and a 100% LTV deal received’t remedy that downside.
Advisers won’t count on this to be the deal for everybody nevertheless it’s higher to have a further product set than not
“They speed up the flexibility for patrons that have already got good affordability however are having to attend to purchase as a result of they haven’t saved the deposit in addition to funds to buy the property.
“Finally, charges shall be greater, so, though a first-time purchaser could also be within the idea, the value could put them off. That is ok in serving to them attain the choice to maintain saving however there clearly should be a worth that can include 100% loans, particularly when just a few lenders have entered that market.”
But do the alternatives outweigh the challenges? Mendes says it can rely upon how the merchandise are structured and underwritten.
He explains that lenders that use real affordability measures, reminiscent of rental historical past, and impose wise limits on borrowing will discover a place out there for such loans.
In settlement, Hollingworth states: “As lengthy as patrons go into the transaction cognisant of the dangers and understanding how the product can work for them, there is usually a place for 100% LTV deals.”
The loans supply a lifeline to first-time patrons who’re caught on the rental treadmill
He provides: “We know that first-time patrons want as a lot assist as they’ll get and these loans prolong the choices open to them.
“Advisers won’t count on this to be the deal for everybody nevertheless it’s higher to have a further product set than not, even when it could solely meet the wants of a sure a part of the market.”
If smaller lenders are profitable of their launch of 0% deposit mortgages, massive banks may observe swimsuit. However, Try Financial mortgage adviser Serena Franklin believes this received’t occur within the close to future.
“Big banks are model delicate, threat averse and really conscious of public scrutiny. They’ll watch from the sidelines whereas smaller lenders and constructing societies check the waters,” she says.
“If challenger banks present success, particularly with improvements like utilizing lease historical past or Open Banking information, we might even see high-street names step in later, providing area of interest variations for professionals, graduates or these with household assist.”
Although the market could not see a pointy rise in no-deposit mortgages, they might drive extra creativity round how affordability is assessed. Oportfolio advertising and marketing and communications director Louis Mason says this might embrace issues like factoring in lease cost historical past or working with builders and authorities schemes to bridge the hole.
These merchandise will open up the property market and generate some momentum to get chains transferring
Mason explains: “The conventional fashions simply aren’t slicing it for lots of would-be patrons anymore. The demand for extra versatile, lifelike options is barely rising, so I’d count on extra innovation, even when it is available in suits and begins.”
Lindsay additionally believes that lenders have to be extra progressive round affordability.
“They may look to increase mortgage phrases to assist preserve funds down, however with greater revenue multiples so purchasers can afford to get into their houses sooner.”
This article featured within the July/August 2025 version of Mortgage Strategy.
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