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100% mortgages used to be common but they disappeared following the financial crash in 2008. But a new type of 100% mortgage has been launched to help people buy a house without a deposit. So what are the advantages of these 100% mortgages and what could go wrong?
With 100% mortgages, you borrow the entire value of the home you want to buy – rather than having to save the minimum 5% deposit up-front. So, if the property you want to buy is valued at £200,000, you would borrow the full £200,000 from the lender and not pay any deposit.
Before the 2008 financial crisis, it was common for lenders to offer 100% mortgages. While some offered mortgages for a greater amount than the property was worth – in some cases up to 125% LTV. However, some people who took out these mortgages are still trapped in their homes which they cannot sell because they have fallen into negative equity.
In the tightening of lending following the crash, 100% mortgages disappeared – with the exception of guarantor mortgages.
However in May 2023, Skipton Building Society launched a 100% LTV mortgage called the Track Record Mortgage. It was originally designed to allow first time buyers to take out a no deposit mortgage, provided they meet certain conditions. However, the criteria was later changed and people who haven’t owned a property in the UK in the last 3 years can now also apply.
In September 2024, more changes were made including allowing Track Record mortgages on new build flats and increasing the maximum mortgage term from 35 to 40 years. The lender has also launched a 100% Shared Ownership Track Record mortgage – read on for more details on all of these.
Skipton’s 100% mortgage is designed to help renters buy a property without needing a deposit if they have a proven track record of paying rent.
Skipton’s 100% Track Record mortgage is available as a five-year fixed rate at 5.29%, with a maximum term of 40 years. And it’s available at 95%-100% LTV. This means you can take it out with up to a 5% deposit. But there are some strict criteria to meet including needing:
For sole applicants: You’ll need to have paid all rent 12 months in a row, during the last 18 months. You may also need to show proof of paying household bills.
For joint applicants (up to 4 people): You’ll have to prove that all rent has been paid either by one applicant or collectively for 12 months in a row, within the last 18 months. If you’ve been renting separately you’ll need to prove that you have paid all your rent. You may also need to show proof of paying household bills.
If you’re considering taking out one of these 100% mortgages, make sure you get expert advice first. Our fee-free mortgage broker partners at L&C will be able to help you.
Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.
Skipton’s 100% mortgages have a maximum loan size of £600,000. And its maximum loan to income ratio is 4.49. However, this increases to 4.75 for incomes greater than £50,000.
In terms of how much you’ll be able to borrow on these 100% mortgages, the lender will consider how much your mortgage repayments would be vs the rent you’ve been paying. It says ‘in some circumstances we will lend loans which have monthly payments up to 120% of the rent the customer is currently paying’.
David Hollingworth at our partners L&C Mortgages explains, “Skipton’s Track Record mortgage is attempting to serve a part of the market that has recently been wholly reliant on help from the Bank of Mum and Dad. Renters will have been frustrated by the need to build a big deposit to meet high purchase prices, whilst covering steep rental payments at the same time.
“It won’t solve all the difficulties for all first time buyers and there will be affordability limitations on the borrowing amount which may still not meet the required purchase price. However, it offers a measured approach that gives credit for the fact that many tenants will have built up a strong track record of managing their housing costs responsibly.
“There will always be concerns that having no deposit could risk negative equity, and it may come with a greater risk if taken out on a new build flat. But this is a longer term product for that reason and if it can help some accelerate the move from renting to home ownership it could be a significant product. Also, the longer maximum term of 40 years may pose another note of caution around how much you will chip away on your mortgage balance but this product is all about making the first step onto the ladder.’
Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.
The main advantage of 100% mortgages is that they let you buy a house without needing to save up a deposit first. Buying a home has become increasingly difficult for first time buyers and those who have previously owned but have fallen off the property ladder, not least because of increasing rents eating into any money they would wish to save for a deposit. In fact, research by Skipton Building Society found eight in 10 tenants feel ‘trapped’ in the rental cycle. So those who have been paying their rent, potentially for years, can now use that ‘track record’ to their advantage in order to help them get on the property ladder using 100% mortgages.
Other potential benefits of 100% mortgages include:
But there are some potential pitfalls. So if you’re asking ‘Can I buy a house without a deposit in the UK?’ and think 100% mortgages are the answer, you should consider the pros and cons carefully first.
The biggest risk with 100% mortgages is you’re more likely to fall into negative equity – this is when the market value of your property is less than the mortgage you have secured on it. So if you use a 100% mortgage to buy a property for £200,000 and its value drops to £190,000 you would still owe your lender £200,000, minus the amount of capital you have already paid off.
And if you are in negative equity you will have problems if you want to remortgage; you could end up trapped on your lender’s more expensive standard variable rate until you have enough equity in your home to remortgage on to a better deal.
However, the longer you have been paying your mortgage for, the more equity in it you will own (assuming your house’s value doesn’t fall drastically). And the fact this is a 5 year mortgage will hopefully reduce your chances of this happening. But to cut the risk of negative equity further, it’s a good idea to make overpayments on your mortgage if possible. Find out more in our guide What can I do about negative equity?
Your risk of falling into negative equity may be greater if you buy a new build home. This is because new build homes often dip in value in the early years after moving in. This is why lenders usually require a bigger deposit for new build mortgages and you may need a bigger deposit if you’re buying a new build flat than a new build house.
However, Skipton has started offering its 100% mortgages on new build flats. But think carefully before taking out a 100% mortgage on a new build flat. If your property loses value in the first few years, even if you start to build up equity in it before your 5 year deal ends, you may face the risk of not having built up enough equity to be able to remortgage.
When these 100% mortgages first launched the idea was that in theory that at the end of the 5 year term you should have enough equity to remortgage onto a cheaper deal.
However, there is a risk your house could decrease in value which would reduce the amount of equity you have. Plus, you may need to pay fees when you remortgage. Also, noone knows how common 95% LTV mortgages will be in 5 years’ time.
But now that the lender is offering a maximum term of 40 years, if you take out a mortgage for this length of time, it’s a different picture:
So you will need your home to increase in value over the mortgage term in order to remortgage. However, as the term is 5 years that gives a decent amount of time for that to hopefully happen. And as we explain above, if you’re considering 100% mortgages, try to chip away at what you owe by making overpayments.
Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.
100% mortgages are a higher risk to the lender so rates are higher than the best first time buyer mortgage rates even on 95% LTV mortgages. And with only one 100% mortgage product of this type to choose from, it’s not as if you can shop around for the best rate.
In September 2024, Skipton Building Society launched a 100% Shared Ownership Track Record mortgage. It’s also a 5 year fixed rate mortgage but comes with a higher rate of 5.6%.
In theory, if you take out a £100,000 mortgage at 5.6% over 35 years, once the 5 year term is over you will owe around £94,600. This would give you the £5,000 deposit for a 95% LTV remortgage deal, assuming you can afford any mortgage fees and that your property hasn’t reduced in value. But if you stretch the same mortgage amount over 40 years, after 5 years you’ll still owe over £96,000 so unless your property has increased in value or you can find the cash, you may struggle to remortgage.
At HomeOwners Alliance, while we appreciate this mortgage may help people buy a home, we urge caution before proceeding. Firstly, Shared Ownership is a complicated scheme so make sure you’re fully aware of the potential pitfalls first. There are also lots of costs further down the line if you want to staircase, which means buying a bigger share of your home. Read our guide What is Shared Ownership? Is it worth it?
Also, more generally, if you’re struggling to get together a deposit on a share of a house, consider carefully whether you can afford to buy a house. There are many costs you’ll need to shoulder, such as if your washing machine breaks down. So make sure you’re not stretching yourself too far.
The easiest way to apply for a 100 per cent mortgage in the UK is by speaking to a fee-free mortgage broker. They’ll be able to advise you on whether you meet the lender’s criteria for 100% mortgages and also if any more suitable products are available.
When thinking about how much deposit you need to buy a house, you will typically need a minimum 5% deposit. If you can save up for a 5% deposit or more, you will have a greater choice of lenders and may be able to access cheaper rates too. But if this isn’t possible, it’s still worth saving as much of a deposit when taking out a 100% mortgage as possible. Even by putting in 3% you will at least have a small amount of equity in your home that you can build on.
Saving for a house deposit seems like an impossible task? Then make sure you get all the help you can.
Yes. Whenever you apply for a mortgage, the lender will look at your credit rating and the better it is, the more likely it is that you will be accepted by a lender. Plus, you may be able to borrow more and at better rates too. In the case of Skipton’s Track Record mortgage, they will check your credit score and they have also specified they need to see that applicants haven’t missed any payments in the last 6 months as one of its lending criteria.
Whether 100% mortgages are a good idea for you will depend entirely on your circumstances. If you can comfortably afford the repayments and can ideally make overpayments on your mortgage you may feel it’s the ideal way to get on the property ladder. Plus you may feel that even if house prices do drop in the near future that they will have recovered by five years’ time.
It is best to get advice tailored to your circumstances from a fee-free mortgage broker. Speak to our partners at L&C today.
No. You will always need a deposit or equity in your home for an interest-only mortgage. Read more in our guide What is an interest-only mortgage?
No you can’t get 100% mortgages on a Buy to Let. You will always need to put down a deposit. Plus the deposits for Buy to Lets are usually higher than for a traditional mortgage. You’ll usually need at least a 20% deposit. Read more in our guide Buy to Let mortgages explained.
It may be possible to get a mortgage with an LTV over 100% if you’re in negative equity as a few specialist lenders do offer this type of mortgage. Rates can be high though and it’s important to get expert mortgage advice if you find yourself in this situation.
An important first step is to work out how much you can afford to borrow on a mortgage, this will depend on things like how much you earn and your outgoings. Find out more in our guide How much mortgage can I afford to borrow?
Getting mortgages for bad credit will always depend on your circumstances including what your credit issues were and how recent. So you should speak to a fee-free mortgage broker about your options.
While you may be able to get a 100 percent LTV mortgage to buy a house you will still need money for other costs relating to your purchase such as the cost of conveyancing fees, stamp duty (if applicable) and the cost of a survey. Find out more in our guide on the Costs of buying a house.
No. There aren’t any no deposit mortgage government schemes. You may have heard of the ‘mortgage guarantee scheme’ however this isn’t something you specifically apply for – its purpose is to stimulate lenders to offer 95% LTV deals. But it’s worth noting that many lenders don’t rely on the scheme for their 95% deals.
There are other types of no deposit mortgages that work in a different way.
Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.
If you can’t afford to save a 5% deposit, what are the alternatives to 100% mortgages in the UK? A couple of options include:
100% mortgages were common before the 2008 financial crash, and some lenders would offer as much as 125% of the value of the property. However while 100% mortgages disappeared after the crash they came back on the market in 2023. But you will be able to get more choice of lenders and access to better rates if you can save a 5% deposit or more. Find out more in our monthly Best First Time Buyer Mortgage Rates.
LTV stands for loan-to-value ratio and tells you what percentage of the home’s value is borrowed. For example, if you buy a £200,000 house and you put down zero deposit your LTV is 100%. But if you put down a £10,000 deposit your LTV would be 95%. Read our guide Mortgages Made Easy which cuts through the jargon to explain the mortgage process to you.
HomeOwners Alliance Ltd is registered in England, company number 07861605. Information provided on HomeOwners Alliance is not intended as a recommendation or financial advice.
Mortgage service provided by London & Country Mortgages (L&C), Unit 26 (2.06), Newark Works, 2 Foundry Lane, Bath BA2 3GZ, authorised and regulated by the Financial Conduct Authority (FRN: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage.
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