Conroy, 32, and his partner Amber, 28, were renting in central Manchester and saw little prospect of homeownership until they discovered a 100% mortgage option. The Track Record mortgage from Skipton Building Society allows borrowers to finance the entire property value without an upfront deposit, although it comes with higher interest rates and strict eligibility checks. Conroy and Amber secured a fixed interest rate of 5.33% for five years and purchased a four-bedroom home for £242,000 in Swinton, Manchester, in August. Conroy expressed that they are still coming to terms with the reality of homeownership.
According to the Bank of England, the share of UK mortgages with deposits less than 10% is at its highest since 2008. The average deposit for first-time buyers is around 20%. Lenders like Lloyds, Santander, Skipton, and Yorkshire Building Society have introduced new mortgage deals covering up to 100% of property values to assist first-time buyers amid rising property prices.
However, these loans typically charge higher rates and are not available for all property types. Conroy and Amber are aware of the risks of negative equity, where the property value falls below the loan amount. They plan to overpay their mortgage to build equity.
Another couple, Bronya, 27, and George, 29, also used a low-deposit mortgage to buy their four-bedroom house in Rhuddlan, North Wales, in August. They secured a loan of £258,000, approximately 98% of the property value, with a £5,000 deposit at an interest rate of 5.89%. They opted for a smaller deposit to allocate funds for renovations. Both couples acknowledge the risks involved but believe in the potential for property value appreciation.
David Hollingworth, associate director at L&C Mortgages, noted that current mortgage deals have stronger affordability checks compared to those prior to the 2008 financial crisis. He advised potential borrowers to carefully consider their monthly payments and the possibility of rising interest rates.