100% Mortgages Now Available For the First Time in 15 Years

A new 100% LTV mortgage for UK homebuyers has been dubbed a potential game changer, but how exactly does the country’s first no-deposit deal since 2008 work?

If you are interested in applying for a zero-deposit mortgage or would like to learn more about how the facility works, call UK Property Finance today for an obligation-free chat.

The cost of purchasing a property has always been a significant issue in the UK, especially for first-time buyers. Unable to come close to meeting prohibitively high deposit requirements, almost an entire generation of would-be home buyers has been confined to overpriced private rentals.

But this is something that could be set to change over the coming months and years as a new 100% LTV mortgage is introduced. The first no-deposit product to be offered in 15 years, experts are optimistic that the new deal could be a game-changer.

At UK Property Finance, we are delighted to have added the UK’s first zero-deposit mortgage in over a decade to our product range. If you are interested in applying or would simply like to discuss your eligibility in more detail, our team is standing by to take your call.

What is a 100% LTV mortgage?

For decades, the biggest barrier to homeownership for UK residents has been the deposit required for a mortgage. In some parts of the country, particularly in London and the South East, the average deposit required can be as much as £80,000 – a completely insurmountable cash payment for most.

By removing the need for a deposit entirely, a 100% LTV mortgage could open up the possibility of homeownership to a whole new group of people. Those who would have never otherwise been able to afford to buy their own home (despite being able to comfortably cover average monthly mortgage repayments) may finally be able to get on the property ladder.

Importantly, a 100% LTV mortgage could help many thousands escape the vicious cycle of renting, where the largest proportion of earnings goes towards paying rent every month with no prospect of ever building equity in their own home.

Who can qualify for a no-deposit mortgage?

For the most part, the UK’s first no-deposit mortgage since 2008 works similarly to a conventional home loan. The product is available as a five-year fixed-rate deal, for which a series of general eligibility requirements must be fulfilled.

Examples of these include:

• Applicants must be first-time buyers aged at least 21 years at the time of their application.
• Evidence must be provided of a minimum of 12 consecutive months of rental payments, with no late or missed payments during this period.
• All household bills must also have been kept up to date for a minimum of 12 consecutive months, such as council tax and utilities.
• No defaults regarding any other repayments should be present on the applicant’s credit report from the past six months, such as mobile phone payments or TV subscriptions.

It is worth noting that each of the requirements above applies to all applicants named on the application, not just the main applicant.

For more information on eligibility requirements or to submit your application for a 100% LTV mortgage, contact the team at UK Property Finance today.

How much is available with a no-deposit mortgage?

All the usual eligibility criteria apply where maximum loan sizes are concerned, based on the general financial status and income level of the applicant.

However, there is an additional restriction with the new 0% deposit mortgage: applicants are only able to borrow up to the equivalent of their monthly rent. For example, if your current monthly rent repayment is £800, you will only be able to take out a mortgage with a maximum monthly repayment of £800.

Here is a brief overview of how much is available with a 100% LTV mortgage, based on the applicant’s current monthly rent:

Monthly rent	Maximum mortgage
£500	£81,000
£750	£123,000
£1,000	£163,000
£1,250	£204,000
£1,500	£244,000
£2,000	£325,000

These figures represent the maximum mortgage loans available; actual offers will vary significantly based on lenders’ usual financial stress tests.

Cautious optimism

While there has been some scepticism from economists regarding the potential risks associated with high-LTV mortgages, the vast majority have welcomed the new product with cautious optimism.

Martin Lewis, founder of MoneySavingExpert.com, said that while he has mixed feelings about 100% mortgages, there is no disputing the fact that they address a problematic and long-standing gap in the market.

“Having campaigned for years to try and help mortgage prisoners locked in at hideous, unaffordable rates, the spectre of 100% mortgages returning leaves me with mixed feelings,” he said.

“Years of property-porn TV shows have spouted the idea that you must buy a house as soon as possible, as big as possible – actually, the real priority is not to overstretch your finances. Before the 2007 financial crash, banks would simply throw mortgage loans out to anyone walking past a branch window; now we need to be more careful.”

“The criteria of requiring a good rental track record to prove someone can make mortgage payments is sensible, and so I cautiously welcome it, done carefully, after advice, as an option for some.”

The UK’s only 100% LTV mortgage is currently available at a five-year fixed rate of 5.49%, with no arrangement fees or processing fees.

For more information on any of the above or to get your no-deposit mortgage application underway, contact a member of the team at UK Property Finance today.