In a housing market where affordability remains a growing challenge, particularly for first-time buyers, a new wave of mortgage products is making homeownership a more tangible reality. Among these, 100% and 99% mortgages have gained significant attention for removing, or nearly removing, the barrier of a deposit. But what do these products really offer, and who are they designed for?
Skipton Building Society: The Return of the 100% Mortgage
Skipton made headlines in April 2023 by launching its Track Record Mortgage, a true 100% loan-to-value product aimed specifically at renters. It was the first time since the 2008 financial crisis that a major lender had returned to the 100% space with a mainstream offering, though this time, the criteria are markedly more cautious. It is worth noting that there were other schemes, such as the Barclays Springboard mortgage. However, this required you to have family support by way of putting 10% of the purchase price on account with the bank. The product introduced by Skipton was the first time since the financial crisis a true 100% mortgage existed.
Rather than requiring a deposit, Skipton assesses whether the applicants have consistently paid rent and household bills over a 12-month period, using that as the justification that a deposit isn’t required. The logic is compelling: if a borrower can demonstrate reliable rent payments equal to or higher than a potential mortgage, they’ve effectively proven they could have saved for a deposit if they weren’t paying rent and further to this, can afford to pay the mortgage. This innovative approach has opened the doors for tenants locked out of the market due to the difficulty of saving for a deposit, despite having strong financial habits.
Another 100% Mortgage Enters the Market
Building on the momentum Skipton created, a second 100% mortgage product was quietly introduced by another lender shortly after, offering further choice for buyers with no deposit. While details vary between providers, the resurgence of 100% mortgages is a clear signal of changing lender appetite, particularly where there’s a strong rental payment history or other mitigants to perceived risk.
Accord Mortgages: A 99% Option for Minimal Deposits
For those who can save even a modest deposit, Accord Mortgages, a subsidiary of Yorkshire Building Society, now offers a 99% mortgage, requiring just £5,000 upfront. This means a first-time buyer purchasing a £500,000 property would need only a £5,000 deposit to be eligible, significantly less than the traditional 5% minimum, which would amount to £25,000 on the same home. This product requires £5,000 as the minimum deposit, so it will not always be a 99% mortgage, but for purchases up to £500,000, this is still a valuable product which only requires a small deposit.
Accord’s 99% mortgage aims to bridge the gap between full LTV products like Skipton’s and traditional high LTV loans, offering more flexible options depending on a borrower’s savings and property value.
Why This Matters Now
For many, especially younger buyers and those in urban centres where rents are high and house prices even higher, saving a deposit can be a greater barrier than passing affordability checks. The average time to save a 10% deposit in the UK now exceeds eight years, according to recent studies. Against this backdrop, the re-emergence of low-deposit and no-deposit mortgages could unlock access to the property ladder for a substantial number of aspiring homeowners.
Caveats and Considerations
While 100% and 99% mortgages offer a powerful opportunity, they’re not without risk. Borrowers must be mindful of:
- Negative equity risk if house prices fall.
- Stricter lending criteria, including rental track records and nearly perfect credit scores needed
- Higher interest rates compared to lower LTV products.
These products are also typically restricted to first-time buyers and often exclude new-build flats, reflecting the caution lenders continue to exercise in this space.
A New Chapter for First-Time Buyers
The return of 100% and 99% mortgages, led by trailblazers like Skipton and Accord, marks a pivotal moment in the UK mortgage market. With affordability challenges and rental pressures at an all-time high, these offerings provide genuine hope for buyers who can demonstrate financial discipline but lack the family wealth or time to build up a traditional deposit.
As lenders continue to innovate in response to shifting demographics and affordability gaps, this new generation of mortgage products could reshape how we think about first-time ownership for years to come.
