Should You Really Be Skipping-for-Joy Over Skipton?

Another month of twists and turns with new products popping up on the market, carving a whole new path for buyers across the UK, so, what does the future hold?

Before I delve into the world of housing, there was the small matter of the Coronation. Some would argue a controversial event but nevertheless an incredible celebration of togetherness and we want to wish all the best for our new king and for the years he will reign.

Some would say it was a bold move by the Skipton Building Society launching its brand-new product “100% no-deposit mortgages” which is angled towards the renters of the UK to give them a better chance of stepping onto the property ladder. But is this a good option, or was there a reason that no one else had followed through with this option before? Someone paying a rent of £1000 would be able to borrow a maximum of £152,000, so without a deposit that doesn’t get you a lot of property. In any event, first-time buyers can check their eligibility through our article on Skipton’s new product here.

It’s key to remember that the market is still unsettled so the Skipton offer at least seeks to provide some stability. The challenges of the housing industry create uncertainty which affects potential buyers starting on the property ladder. Add to this the recent increase in interest rates, another unsettling event for the would-be property buyer, likely to curtail new entrants to the market. In many ways the current interest rates are the new norm, it’s just since March 2020, we’ve seen 12 interest rate increases. Some would argue it would have been better and less disruptive to have had higher rises earlier providing a more stable outlook now - we will never know.

Recalling the market of 2008, when house prices fell by 16% (Nationwide data) there was a product similar in design to the Skipton deal, but where buyers were able to borrow up to 125% of a property’s value, structured as a 95% mortgage with a 30% unsecured loan on top, sounds crazy now, however, this was withdrawn after a backlash against easy credit and lax lending.

I don’t tend to like to foresee the future of the market, but this move from Skipton Building Society could potentially see some more lenders delivering similar products to compete, which could be a good thing for buyers entering the market.

It’s certainly tough to save for a deposit when a high proportion of your income goes on rent, so hopefully, it will pave the way, adopting the logic that if you can pay your rent on time then you’re at a lower mortgage risk, which makes sense.

The key thing right now is to get prepared and  take advice from professional advisors who can explore the best products that suit your needs. Who knows, with a bit of house price correction (not 16% I can safely say) buyers could find something more affordable after all!

Until next time,

Gavin Welch

Financial Service Sales Director, Mortgage Matters Direct

*https://www.thetimes.co.uk/article/nationwide-reports-16-fall-in-house-prices-over-2008-nx20lpvm6m5