Hanley Economic Building Society has introduced a new 100% mortgage option tailored for first-time home buyers seeking to enter the property market without a deposit. Under the Rent to Own mortgage scheme, eligible borrowers can secure loans of up to £350,000, provided they earn a minimum annual income of £25,000. The loan amount is restricted to 133% of the applicant’s current monthly rent, with the average UK rent standing at £1,366 per month. This implies that individuals could potentially obtain a mortgage with monthly repayments reaching £1,817. Applicants will still undergo standard credit evaluations.
The interest rate for this product is fixed at 5.79% for a five-year term, positioning it as a relatively more costly option compared to alternative offerings that necessitate a deposit.
For instance, Leek Building Society provides a 4.56% rate for five years with a 5% deposit, while Co-operative Bank offers a 4.5% fixed rate for two years with the same deposit requirement.
Experts in the mortgage industry caution that opting for a 100% mortgage could increase one’s exposure to negative equity if property values decline. Ranald Mitchell, Director at Charwin Mortgages in Norwich, explained that while this mortgage option removes the need for a substantial deposit, it also lacks a financial safety net. Mitchell underscored the importance of maintaining a strong payment record and meeting higher interest rates associated with such specialized products.
Following Skipton Building Society’s recent launch of its Track Record Mortgage, which demands no deposit but necessitates proof of 12 months of timely rent payments, the market has seen an increase in no-deposit mortgage alternatives. However, these options typically require a guarantor to back the borrower, where a family member or friend who owns a property would be responsible for covering missed mortgage payments.
Readers can designate Daily Mirror as a ‘Preferred Source’ on Google News for convenient access to their preferred news content.