Deposit-free mortgage that doesn’t need a guarantor and is aimed at ‘trapped’ renters launches for first time

The new mortgage deal doesn’t require a deposit or a guarantor and could be a lifeline for first-time buyers trapped in the ‘renting cycle’ - here’s what you need to know.
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A deposit-free mortgage aimed at people trapped in the “renting cycle” has been launched by a UK building society. There are a handful of other no-deposit deals available at the moment, but they all need the financial backing of family or friends.

However, the new offer from Skipton Building Society does not require a guarantor, just 12 months of on-time rental payments and a good credit history. Skipton, which is the UK’s fourth biggest building society, says it recognised a "gap in the market".

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The new five-year fixed-rate mortgage is only for people currently renting a property. Stuart Haire, the society’s chief executive, told BBC News that "until now there has been no solution for [renters] to buy a property due to a lack of savings or access to family wealth".

It comes after a recent study by Which? revealed that an estimated 700,000 people missed or defaulted a rent or mortgage payment in April amid the ongoing cost of living crisis. First-time buyers are facing an uphill battle due to skyrocketing rents at a time when the government’s Help to Buy scheme, which helped around 250,000 first-time buyers over a decade, is no longer open.

Generation Rent, which campaigns on behalf of private renters, said that while no-deposit deals could help first-time buyers, the key problem remains a lack of affordable homes. Many dreaming of buying their first house could still miss out on the new Skipton deal, as they still have to pass credit and affordability checks.

The offer also requires 12 consecutive months of good rental history, a track record that is increasingly difficult to build as demand for rented accommodation soars for more than 50%, according to Zoopla. Many have been forced to engage in “bidding wars” to secure rental properties, particularly in big cities such as London and Bristol.

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Since the recession in 2008 there have been very few 100 per cent loan value mortgages available for buyers There are currently 15 other zero-deposit products on the market, according to financial data firm Moneyfacts.

A deposit-free mortgage aimed at people trapped in the “renting cycle” has been launched by a UK building society.A deposit-free mortgage aimed at people trapped in the “renting cycle” has been launched by a UK building society.
A deposit-free mortgage aimed at people trapped in the “renting cycle” has been launched by a UK building society.

The new offer from Skipton Building Society is different from existing products by not requiring a guarantor. But at 5.49 per cent, the interest rate is a bit more expensive than the average five-year fix of 5 per cent.

Will Barber Taylor from Generation Rent said: "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. But it would need to be in combination with other factors to make it effective.”

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