Skipton launches deposit-free mortgage aimed at renters

A deposit-free mortgage specifically aimed at people currently renting has been launched by a UK building society.

While a handful of other no-deposit deals are available, they all need the financial backing of family or friends.

Skipton Building Society says while its deal requires 12 months of on-time rental payments and a good credit history, it does not need a guarantor.

However, at 5.49% the interest rate is more expensive than the average five-year fix of 5%.

Generation Rent, which campaigns on behalf of private renters, says the shortage of affordable properties within the budget of first-time buyers is still the main stumbling block for those struggling to get on the property ladder.

"It's not necessarily going to help all the people who are looking to buy a first-time home if there aren't more houses available to buy," says Will Barber Taylor from Generation Rent.

Currently there are 15 other zero-deposit products on the market, according to financial data firm Moneyfacts, accounting for just under 0.3% of the UK market.

First-time buyers are facing an uphill battle. Rapidly rising rents have made saving for a deposit increasingly difficult, at the same time that the government's flagship Help to Buy scheme, aimed at helping first-time buyers, is no longer open.

• What is happening to house prices?

• What are your rights as a tenant when you're renting?

The Skipton, which is the UK's fourth biggest building society, says it recognised a "gap in the market".

Stuart Haire, the society's chief executive, told the BBC that "until now there has been no solution for them [renters] to buy a property due to a lack of savings or access to family wealth".

David is renting with his partner and new baby in North Yorkshire. "It's getting that deposit together that's really difficult with rent prices," admits David.

"If I can prove I've been paying rent for the last 10 years of my life why can't I have a mortgage."

David has been renting for the past 10 years

The government's Help to Buy scheme saw the Treasury lending homebuyers between 5% and 20% of the cost of a newly-built home, and up to 40% in London.

The scheme closed to new applicants in October 2022, but there are rumours that something along similar lines could be re-introduced.

What happens if I miss a mortgage payment?

• A shortfall equivalent to two or more months' repayments means you are officially in arrears

• Your lender must then treat you fairly by considering any requests about changing how you pay, perhaps with lower repayments for a short period

• Any arrangement you come to will be reflected on your credit file - affecting your ability to borrow money in the future

Read more here

But a rise in zero-deposit mortgages may not be welcomed by everyone, as riskier mortgages with a high loan to value were a root cause of the 2008 financial crash.

Mortgage expert Andrew Montlake says then lenders were just interested in volume rather than quality.

"The world is very different now," he says, and adds that his opinion has changed over the past 15 years, as long as the 100% loan value mortgages are "underwritten sensibly".