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Telegraph
02-06-2025
- Business
- Telegraph
Why renters like me shouldn't be tempted by a shortcut to homeownership
In 2025 it is notoriously difficult to buy your own property. House prices are now almost eight times the average full-time salary, having risen by 23pc over the pandemic according to official data. In response, lenders are offering innovative products to help first-time buyers get a foot on the property ladder. The most eye-catching among these is the 100pc mortgage – where you don't need a deposit in order to buy. These loans aren't new. Before the global financial crash, they were more readily available when lenders were happier shouldering the risk. However, they're back. In 2023 Skipton announced its Track Record Mortgage, which allows renters to use their record as a tenant to get a loan to the full value of a property. In the last month Gable Mortgages and April Mortgages have both launched no-deposit loans. There are also guarantor and family deposit mortgages where a friend or family member agrees to make up any shortfall in payments if necessary or places the equivalent of a deposit in a savings account linked to the loan. As a renter for more than a decade, this should be welcome news; a chance to own my own place without the hurdle of saving a deposit. However, I wouldn't dare. A whole property loan is a terrible proposition. The ramp up in no deposit mortgage options also comes as the Financial Conduct Authority (FCA), with support of the Chancellor, is looking at loosening the rules around mortgage lending for first-time buyers, increasing the risk of borrowers ending up with mortgages they cannot afford. The biggest and most obvious risk is that you could wind up in negative equity – where the amount you owe is greater than the value of your property. House price growth has fluctuated significantly over the past few years, with values falling 2.7pc in December 2023 but rising 6.4pc in March this year. While interest rates are slowly falling there is no major impetus on the horizon, such as the stamp duty relief we saw during the pandemic. My colleague Josh Kirby has written about why homeowners face a hangover after the frenzied activity during the pandemic. If you have a solid 10pc of equity in your property you're likely to be keeping half an eye on values but you can weather the usual ups and downs of the market. Without it, unless you are confident you can buy equity in the property rapidly, you risk becoming trapped. Gable Mortgages' 100pc loan even includes options for new-build properties that have traditionally not been eligible under these loans, in part due to the lack of certainty around their values. You will also probably be paying a higher interest rate than other borrowers with similar sized loans. While rates have been very gradually falling over the past 12 months, those for 100pc mortgages are notably higher making it an expensive way to borrow. Buying over renting will usually involve a calculation about whether you are paying more to your landlord or the lender in interest payments. If you increase the cost of your borrowing you may be losing more than if you were renting, and reduce the amount you can put either into you property to gain some equity or a deposit savings account to be invested into a home later on. Currently providers are offering rates of between 5.3pc and 6pc, whereas average rates in the market sit between just under 4pc and 5pc, according to The Telegraph's Best Buy data. What is more, some lenders demand you lock in these rates for up to 15 years leaving you at risk of paying substantially more than other borrowers if rates fall. These higher rates mean you eat into the money you have available to pay down the loan itself, as well as paying more overall. It also leaves you with less financial flexibility if something goes wrong such as illness or losing your job. That said, some lenders do offer rates that drop as you increase your equity in recognition of the reduction in the risk they are taking. Then there is the issue of remortgaging. There are a limited number of lenders offering 100pc or even 95pc loans so when it comes to the end of your mortgage term you may struggle to find a better option. It means you will need to make a significant dent in your equity in order to be confident you can move to a better rate. There is also the risk that you cannot remortgage and are forced on to your lender's standard variable rate which will be much higher. Currently the average five-year fixed rate is 5.08pc while the average SVR is sitting at 7.58pc. While renting contains the obvious element of uncertainty if your rent becomes affordable you can move (I appreciate it isn't always quite that easy), whereas with mortgage rates you are trapped unless you wish to sell, which comes with its own list of issues and uncertainties. If you want to sell your property and you're in negative equity or haven't been able to build up a meaningful sum of equity yourself, you risk falling into debt in order to cover the difference, or no better off than when you started. At a time when costs are continuing to rise (a drop in the rate of inflation just means prices are rising slower, not dropping) that is no small task. Particularly when you consider the inevitable costs you incur from the wear and tear of owning a property that will eat into your savings, something renters live without. It is also worth remembering that 100pc mortgages do not mean you can simply own a property tomorrow, far from it. Rightly the loans have strict eligibility requirements you will have to meet, requiring a strong credit score and a reliable long-term income often above and beyond the criteria for other mortgages. And while you avoid having to put together a deposit you will still face the substantial costs associated with home buying including stamp duty land tax as well as legal, survey and moving costs all of which will likely total thousands. I would rather take the time to build up a lump sum that includes the estimated costs of buying and moving rather than only saving enough to cover the practical costs of buying that leaves you exposed if something goes wrong and you need more money. When Skipton first launched its 100pc mortgage a mortgage broker told me the ideal candidate was a newly qualified city lawyer on a salary of more than £100,000 (before bonus) looking at a rapid upward earnings trajectory. That makes sense. They won't have had time to save but can be close to certain they'll be able to overpay and own a substantial part of their property by the time they come to remortgage. However, for the rest of us the risk is too great. It may take you (and me) longer to save but when you buy your own home, you will do so knowing it's yours and unlikely to be taken away from you.
Daily Mail
30-05-2025
- Business
- Daily Mail
Two lenders now offer no deposit 100% mortgages: Could a major bank launch one next?
Two lenders are now offering people the chance to buy a home with a mortgage covering the entire purchase price. April Mortgages and little-known lender Gable Mortgages are both providing the home loans which don't require the borrower to put down any deposit. No-deposit mortgages have been extremely rare in recent years, with most lenders requiring the borrower to put down at least 5 per cent. Those that do offer deposits lower than that often require a parent to act as a guarantor. April requires a minimum income of £24,000 to get its 100 per cent deal, and borrowers will also need to fix for either 10 years or 15 years - much longer than the normal two or five year products most people sign up to. Its interest rate initially starts at 5.99 per cent. On a £200,000 mortgage being repaid over a 25 year term that would mean paying £1,288 per month. Gable Mortgages has two products available -a standard mortgage, and one that is specific to new-build buyers purchasing a home from a list of 'partner' developers. Both of the mortgages are offered on a five-year fixed term only. Gable borrowers need to be aged at least 23 and want to borrow a minimum of £125,000. They must also go through a mortgage broker. The rate on the standard mortgage is 5.95 per cent, and on the new-build mortgage is 5.65 per cent. The return of 100 per cent mortgages signals both innovation and caution in the market, according to Ravesh Patel, director and senior mortgage consultant at broker Reside Mortgages. 'These products can offer a valuable solution for renters stuck in the 'deposit trap,' saiys Patel, 'especially those with strong, consistent payment histories but limited ability to save. 'These mortgages can be genuinely beneficial, but only for a narrow segment of the market and under the right circumstances. 'For renters with a solid income and clean credit record, but no access to a deposit such as younger professionals or healthcare workers paying high rents—they can be a lifeline into homeownership. 'These borrowers often have a track record of managing monthly outgoings that match or exceed what their mortgage repayments would be.' Could a big bank launch one soon? Mortgage lenders appear to be very keen to entice borrowers at present. On top of rates falling, a whole host of major banks have relaxed their own affordability rules enabling people in many cases to borrow tens of thousands of pounds more than they could at the start of the year. Last month, the number of mortgage deals available to those buying with a 5 per cent deposit has reached its highest level since the financial crisis, according to Moneyfacts. While rules are being relaxed, new products keep being dreamt up. Earlier this month, Skipton Building Society began offering borrowers the chance to get a mortgage without having to make repayments for the first three months. Last month, April Mortgages began offering home buyers and homeowners the opportunity to borrow up to seven times their annual salary - as opposed to the usual four and a half times. With so much change taking place in such a short space of time, it isn't hard to imagine a major lender starting to offer a 100 per cent mortgage soon. 'It's possible,' says Ravesh Patel. 'However, to increase more contestability in this specific market segment, government support or guarantees are crucial. 'High street lenders are acutely aware of the reputational and regulatory risks associated with high loan-to-value (LTV) lending. 'A major bank might enter the space if there's political or public pressure to support first-time buyers, but it would likely be in a tightly controlled format, perhaps linked to family support or limited to specific borrower profiles.' Is this different from what was on offer pre-crisis? As of September 2007, there were 241 mortgages that covered 100 per cent of a purchase price, according to Moneyfacts' Mortgage Treasury Report data. These quickly disappeared over the next year as the financial crisis unraveled. There are currently 20 no-deposit mortgage options, according to Moneyfacts - most of which require a family member to act as a guarantor. With the arrival of April's and Gable's 100 per cent loan-to-value deals in quick succession some may feel we are heading back towards the dangerous territory or irresponsible lending. However, lenders are governed by much stricter checks and balances in today's market, according to Patel. 'Pre-crisis 100 per cent mortgages were often paired with lax affordability checks, self-certification, and interest-only structures—creating a toxic mix when the market turned,' says Patel. 'Today's versions are typically built around affordability models that mimic rent payments, much cautious underwriting and are stress-tested under stricter FCA rules, which adds a layer of security for both lender and borrower. 'In short, while these products share a name with their pre-2008 predecessors, the regulatory environment, underwriting practices, and structure are far more cautious. The intention is to offer targeted support without compromising financial stability.' Are 100% mortgages a good way of getting on the ladder? While these offers can be great for those struggling to get onto the property ladder, borrowers should think carefully before taking a 100 per cent mortgage. Biding one's time to save even a small deposit could save them more money and give them greater security in the long run. For a start, monthly payments will be higher given the higher rates. 'When opting for a higher-risk mortgage such as a 100 per cent or 95 per cent per cent loan-to-value, one of the things you need to consider is how high monthly payments may be each month and whether you can afford them or not,' said Jonathan Bone, head of mortgages at broker 'Lenders in general consider high-loan-to-value mortgages risky and so often add higher interest rates to limit the number of people opting for them. 'This can translate to larger monthly payments and more interest paid over the mortgage term. There is also a greater risk of negative equity if house prices were to fall. 'When opting for a higher-risk product, you also need to consider the potential of negative equity,' adds Bone. 'If property prices fall, your mortgage could end up exceeding the value of your home, leading to negative equity, which can make it difficult to sell or remortgage in the future.' While homeownership remains one of the most common ways to build household wealth, starting with no equity means the wealth-building journey is likely to be slower, according to Ravesh Patel. He says: 'Buyers relying on 100 per cent mortgages should have a clear, proactive plan to reduce the loan balance over time, ideally through regular overpayments. 'This often requires lifestyle adjustments or cost savings elsewhere in the household budget, which not all buyers are prepared for. It's also important not to rely solely on future property price growth to build equity. 'While the housing market may appreciate over time, this is not guaranteed and exposes buyers to the risk of negative equity, particularly in the early years,' he adds. 'In short, a 100% per cent mortgage may offer a faster entry point to owning a home, but buyers must treat it as a strategic financial commitment, not just a shortcut. 'Long-term stability and wealth creation will depend on how effectively they manage the debt—not just on the market.' Best mortgage rates and how to find them Mortgage rates have risen substantially over recent years, meaning that those remortgaging or buying a home face higher costs. That makes it even more important to search out the best possible rate for you and get good mortgage advice, whether you are a first-time buyer, home owner or buy-to-let landlord. > Mortgage rates calculator > Find the right mortgage for you To help our readers find the best mortgage, This is Money has partnered with the UK's leading fee-free broker L&C. This is Money and L&C's mortgage calculator can let you compare deals to see which ones suit your home's value and level of deposit. You can compare fixed rate lengths, from two-year fixes, to five-year fixes and ten-year fixes. If you're ready to find your next mortgage, why not use This is Money and L&C's online Mortgage Finder. It will search 1,000's of deals from more than 90 different lenders to discover the best deal for you.
The Sun
20-05-2025
- Business
- The Sun
Another big lender launches ‘crucial' no deposit mortgage in a boost for first-time buyers
ANOTHER big lender has jumped on the bandwagon, launching its first no deposit mortgage in a huge win for first-time buyers. Gable Mortgages has announced the launch of its first zero-deposit mortgage products. 1 This follows a similar announcement last week from April Mortgages, signalling a potential shift in the market towards helping first-time buyers overcome the deposit hurdle. A 100% mortgage allows you to borrow the entire purchase price of the property, meaning no deposit is required. Gable Mortgages is offering a standard five-year fixed-rate mortgage at 5.95% and a new-build version at 5.65%, both requiring no deposit. The lender aims to support first-time buyers, key workers, and primary residents. Compared to many other lenders, Gable offers a standard mortgage allowing borrowers to secure up to 4.49 times their annual salary. For key workers in specific professions, this increases to 5.5 times their salary. For example, someone earning £40,000 a year could potentially purchase a home worth £179,600 without any savings, and this amount could rise to £220,000 if they are a key worker. To qualify for a Gable mortgage, applicants must be at least 23 years old, borrow a minimum of £125,000, and apply through a mortgage broker. Justin Le Roux, chief executive of Gable Group, said: "This is a significant milestone for Gable Mortgages as we launch our first two products into the UK. "We understand how hard it is for first-time buyers to get onto the property ladder, which is why we have created our zero-deposit mortgage solutions." Why you should be cautious with 100% deposit mortgages THESE types of mortgages can open doors for people who wouldn't be able to get on the housing ladder otherwise. Experts have generally seen the reintroduction of 100% mortgages as a positive thing and this deal from April Mortgages does have rigid lending criteria. But it's important to remember this deal won't be for everyone and they can be seen as quite controversial home loans. 100% mortgages mean you don't need a deposit - but it also puts buyers at higher risk of negative equity. This is when your mortgage is more than the total value of your home, which can happen if house prices fall. If you're in this position it can make it harder to remortgage, sell your home and get competitive rates from lenders. Typically they also have higher interest rates, making them more expensive. The general rule is that the smaller your deposit the higher your monthly mortgage repayments will be. Therefore because you won't have a deposit, your monthly repayments are likely to be more expensive compared with someone who did put down a deposit. You will need to be sure you can keep up with the payments and account for any potential financial shocks. 100% mortgages disappeared after the financial crisis in 2008, as they were seen a contributor to the sub-prime housing bubble and subsequent collapse. Unlike Gable's offer, April Mortgages' zero-deposit mortgage comes with different features and requirements. It requires a minimum household income of £24,000 and a property value of over £75,000. Borrowers can secure up to 4.49 times their annual income, with the option of 10 or 15-year fixed terms. Additionally, there are no early repayment charges, but the product does not offer specific benefits for key workers. Nicholas Mendes, mortgage technical manager at John Charcol, said: "Gable Mortgages' new zero deposit five-year fixed deal is a crucial addition to the options available for first-time buyers, particularly those who are finding it increasingly difficult to save for a deposit while contending with record-high rents. "Coming hot on the heels of April Mortgages' launch last week, it shows lenders are starting to respond to the challenges faced by aspiring homeowners who are mortgage-ready in every way except for the deposit." The average deposit in the UK is now over £60,000, making saving a significant challenge. In London, this figure rises to £100,000. Before the 2008 financial crash, 100% mortgages were more common but largely vanished as lending rules became stricter. Now, with Gable and April reintroducing these products, other lenders may soon join the market. Nick added: "Increased competition could lead to better pricing, more innovation and a wider range of options for first-time buyers." Other lenders are also making it easier for first-time buyers by reducing affordability rules. Accord, for example, offers a £5,000 deposit mortgage. How to get the best deal on your mortgage IF you're looking for a traditional type of mortgage, getting the best rates depends entirely on what's available at any given time. There are several ways to land the best deal. Usually the larger the deposit you have the lower the rate you can get. If you're remortgaging and your loan-to-value ratio (LTV) has changed, you'll get access to better rates than before. Your LTV will go down if your outstanding mortgage is lower and/or your home's value is higher. A change to your credit score or a better salary could also help you access better rates. And if you're nearing the end of a fixed deal soon it's worth looking for new deals now. You can lock in current deals sometimes up to six months before your current deal ends. Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost. But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal - but compare the costs first. To find the best deal use a mortgage comparison tool to see what's available. You can also go to a mortgage broker who can compare a much larger range of deals for you. Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender. You'll also need to factor in fees for the mortgage, though some have no fees at all. You can add the fee - sometimes more than £1,000 - to the cost of the mortgage, but be aware that means you'll pay interest on it and so will cost more in the long term. You can use a mortgage calculator to see how much you could borrow. Remember you'll have to pass the lender's strict eligibility criteria too, which will include affordability checks and looking at your credit file. You may also need to provide documents such as utility bills, proof of benefits, your last three month's payslips, passports and bank statements.
Daily Mail
19-05-2025
- Business
- Daily Mail
Another lender launches 100% mortgages for first-time buyers
A new mortgage has been launched offering the chance to borrow 100 per cent of a property's value - the second such deal in less than a week. Little-known lender Gable Mortgages, which was founded in 2024, is providing home loans which don't require the borrower to put down any deposit. It follows April Mortgages ' launch of a similar 100 per cent product last week. No-deposit mortgages have been extremely rare in recent years, with most lenders requiring the borrower to put down at least 5 per cent. Those that do offer deposits lower than that often require a parent to act as a guarantor. According to Gable's website, its products are aimed at 'generation rent' who can manage to pay their rent - which may be higher than a mortgage on a similar property - but struggle to save a deposit. Justin Le Roux, chief executive of Gable Group, said: 'There is a whole generation of renters out there who are struggling to save to buy and pay their rent at the same time. 'This has made it significantly harder for first time buyers, especially key workers get onto the property ladder. 'We believe in changing this by offering a solution where the buyer can get a quick decision based on affordability and not – like so many other products on the market – based on what they have managed to save up or borrow from the bank of mum and dad.' The lender has two products available -a standard mortgage, and one that is specific to new-build buyers purchasing a home from a list of 'partner' developers. Comparably to many other lenders, Gable's standard mortgage allows borrowing of 4.49 times the buyer's salary. This rises to 5.5 per cent for key workers in certain professions. It means someone earning £40,000 a year could hypothetically buy a home worth £179,600 without any savings - and if they were a key worker, that could rise to £220,000. Gable borrowers need to be aged at least 23 and want to borrow a minimum of £125,000. They must also go through a mortgage broker. Both of the mortgages are offered on a five-year fixed term only. This is different to April Mortgages, where borrowers must fix for 10 or 15 years. The rate on the standard mortgage is 5.95 per cent, and on the new-build mortgage is 5.65 per cent. This is substantially more expensive than the mortgages available for those who could save a 5 per cent deposit. For example, Monmouthshire Building Society has a five-year fix at 4.75 per cent with a £1,409 fee, while Nationwide offers one at 4.79 per cent with a £1,167 fee. Someone borrowing a £200,000 mortgage over 30 years would pay £1,043 every month on the Monmouthshire 5 per cent deposit mortgage, compared to £1,193 on the standard Gable 0 per cent deposit mortgage. On April's rival 100 per cent mortgage, the interest rate initially starts at 5.99 per cent, but this can be reduced over time as the debt is repaid. Gable borrowers will need to look out for the fees, which are considerably higher than those charged on with-deposit mortgages with other lenders. On the standard mortgage, they are tiered depending on the value of the property and range from £2,095 on a property worth between £125,000 and £200,000, to £4,995 on a home worth £400,000 to £500,000 and £9,995 on a home worth between £800,000 and £1million. On the new-build mortgage, though, the fees are paid by the developer. With most mortgage lenders, the arrangement fee is the same no matter what the property price, and usually ranges from nothing to about £2,000. Borrowers will also want to look at the legal fees on Gable's mortgages. If they choose to use Gable's partner solicitor, they will pay between £2,395 and £2,995 in total, including their own conveyancing and Gable's legal costs. It is standard in the industry for mortgage applicants to pay the lender's legal costs, although some offer 'fee-free legals' deals. However, if a Gable borrower chooses to use their own solicitor, they will need to pay £1,495 to cover Gable's legal fees, as well as their own conveyancing solicitor's fees on top. According to Compare My Move's Cost of Moving House Index, the average conveyancing fee in 2024 was £1,567. Are 100% mortgages a good idea? While no-deposit mortgages will help more people get on the property ladder, reactions to them in the property industry are often mixed. Some say that a person's long-term earnings and their ability to pay the mortgage each month are more important than their ability to save a one-off deposit. However, others raise concerns about negative equity, which is when house prices fall and the value of a home falls below that of the mortgage secured on it and makes it harder to remortgage or sell. They also recall the struggles faced by some buyers with 100 per cent mortgages during the financial crisis. Kylie-Ann Martin, mortgage broker at Selby-based KAG Financial, told the news agency Newspage: 'I truly believe there is a place for 100 per cent mortgages, if they are regulated in the right way. 'We speak to many people paying huge amounts of rent that would see a considerable reduction in costs when comparing this to a mortgage - so for some I think it is fantastic that more lenders are offering them an opportunity to become homeowners.' While Kundan Bhaduri of portfolio landlord and property developer The Kushman Group said: 'Gable and April Mortgages' zero-deposit products bear striking resemblance to Northern Rock's pre-2007 folly that culminated in Britain's first bank run since 1866 and left millions in negative equity. 'The UK property market already suffers from endemic structural issues. 'Injecting more unqualified buyers will further inflate prices whilst creating a new cohort of vulnerable homeowners.' Best mortgage rates and how to find them Mortgage rates have risen substantially over recent years, meaning that those remortgaging or buying a home face higher costs. That makes it even more important to search out the best possible rate for you and get good mortgage advice. Quick mortgage finder links with This is Money's partner L&C > Mortgage rates calculator > Find the right mortgage for you To help our readers find the best mortgage, This is Money has partnered with the UK's leading fee-free broker L&C. This is Money and L&C's mortgage calculator can let you compare deals to see which ones suit your home's value and level of deposit. You can compare fixed rate lengths, from two-year fixes, to five-year fixes and ten-year fixes. If you're ready to find your next mortgage, why not use This is Money and L&C's online Mortgage Finder. It will search 1,000's of deals from more than 90 different lenders to discover the best deal for you.
