Skipton Constructing Society has launched a 100% mortgage for tenants with a robust track-record of paying the lease on time – the primary of its sort for 15 years.
The so-called Observe File Mortgage is obtainable at 4.39% for a most of 35 years, whereas it comes with no charges.
Danny Belton, head of lender relationships at Authorized & Basic Mortgage Membership, stated: “A product that helps these with a robust historical past of rental funds, and those that have paid family payments over a chronic time frame, is precisely the form of modern providing the market wants to assist folks make the transition from renting to purchasing.
“Many consumers have already proved their potential to pay excessive month-to-month rental funds, and it’s encouraging {that a} lender is now recognising this in its standards necessities.
“After all, the trade is conscious about the potential dangers, reminiscent of debtors being extra susceptible to decreases in their very own house worth and due to this fact going into unfavourable fairness.
“Nevertheless, it’s essential to keep in mind that affordability checks are way more sturdy now than in 2007/8, and we must always welcome the lender’s forward-thinking method with this product.”
Detrimental fairness is when the mortgage mortgage turns into value greater than the property, which might occur when costs fall.
If that occurs it may be onerous for homeowners to remortgage till they both repay a piece of the mortgage or home costs rise once more.
Halifax reported that common UK home costs fell by 0.3% in April, whereas it stated additional falls are anticipated this yr.
Adrian Anderson, director of property finance specialists, Anderson Harris, stated: “For renters desirous to get onto the property ladder with good credit score historical past and a 12-month monitor report of assembly rental funds on time, that is probably welcome information.
“This new product removes the stumbling block of saving for a deposit and the ever-growing reliance on the Financial institution of Mum and Dad to facilitate house possession. We’ve already taken a lot of calls at the moment from first time consumers.
“While the launch of this product has been much-anticipated, even these with bigger incomes might nonetheless wrestle to buy the properties they need because of the restrictions within the product’s lending standards, the broader excessive rate of interest surroundings and excessive home costs in lots of areas of the UK.”
Rob Houghton, chief govt of reallymoving, the worth comparability website for house movers, stated: “For lots of people who don’t have the means to avoid wasting while paying report excessive rents, and who aren’t fortunate sufficient to obtain items of enormous sums from relations, house possession appears like a pipe dream.
“For years, accountable renters have been calling for his or her fee historical past to be taken under consideration, and if they will present that over time they’ve had no points affording lease which is at the least as excessive, if not increased, than their mortgage reimbursement can be, that ought to present reassurance to lenders.
“There are undoubtedly dangers and folks have to be made totally conscious of them. Borrowing 100% of a property’s worth means you’re banking on property costs going up. Whereas that can most likely be the case for many people who find themselves capable of keep within the property for at the least 3-5 years, which is what we all the time advocate, it gained’t be the case for everybody.
“But it surely’s a unique property market panorama to 2008 and lenders at the moment are way more cautious. Sturdy vetting processes should be utilized to make sure increased danger debtors are filtered out.”
