"There’s a clear gap in the market for people who have a strong history of making rental payments over a period of time and can evidence affordability of a mortgage"
Skipton Building Society has launched a new 100% LTV 'Track Record Mortgage' exclusively for current renters.
The five-year fixed rate is available at 5.49% over a max term of 35 years between 95-100% LTV.
The mortgage is available to tenants who feel 'trapped' in the rental cycle and are over the age of 21. The product is subject to affordability and credit score, plus evidence of a minimum of a 12-months good track record rental history.
Skipton is also ensuring the monthly mortgage payment for each applicant is not more than the average of their last six months rental costs that they have paid. For example, a tenant paying an average of £800 per month over the last six months will have a maximum monthly mortgage payment of £800.
Recet research from Skipton found that eight in ten tenants feel ‘trapped’ in the rental cycle, paying rents that are higher than a mortgage which then prevents them saving a deposit to buy their own home. At the same time house prices for first time buyers have risen by an average of 18% in the last two years, an increase of £39,680.
The cost-of-living crisis is cited as the main setback for renters, who are now saving less for a deposit than ever before, with 41% stating house prices in their area are rising too quickly for them to keep up. More than one in three (35%) are struggling to save due to increased rent – and are now having to find an extra £1,000 per year for their landlord.
Charlotte Harrison, CEO of home financing at Skipton, said: “We need to tackle the UK’s housing affordability crisis to enable more people, especially renters who are trapped in renting cycles, to buy their first home.
“People trapped in renting is one of the UK’s biggest housing challenges, having a massive impact on the fabric of our society. With escalating rents and the cost-of-living squeeze further impacting people’s ability to save for a house deposit – it’s making it almost impossible for people get onto the property ladder.
“We recognise there’s a clear gap in the market for people who have a strong history of making rental payments over a period of time and can evidence affordability of a mortgage – but there is currently no solution for them to buy a property due to lack of savings or access to family wealth. It is time for a re-think on these massive barriers to home ownership, and we’re proud to take the lead on bringing to the market, solutions for such a massive social problem.
“This is why we’re introducing our Track Record Mortgage. It has been carefully created with the challenges generation rent is facing in mind, together with the potential risks and challenges they may encounter in the future too. In building our mortgage product with these challenges at the centre we’re ensuring considerations around negative equity have been fully taken into account.”
Andrew Montlake, managing director of Coreco, commented: “In the current era it seems that the gap between the haves and the have nots is increasing, especially when it comes to getting onto the housing ladder.
“There are many potential buyers who have proved they can afford to pay rent at the current high levels, but just do not have the means to meet ever increasing deposit levels and feel constantly at the mercy of rising rents.
“Whilst I have had some concerns in the past, the time now seems right for a new type of 100% mortgage, one that is underwritten prudently and where affordability is carefully taken into account. The Skipton product is different to those of yester-year, as it is linked to the rent currently being paid and the mortgage payment cannot be more than the average of the borrowers last 6 months rent.
“This new product will not be suitable for everyone, but it will help some of the new generation of home buyers get off the rental treadmill and enjoy the security of owning their own home. It is important that we recognise also the need to change our thinking that property is a short-term investment, and realise it is a long-term home for us to build our memories in.”
