"This is a really bold statement from Skipton about the current property and mortgage market."
Following the news Skipton has launched a 100% LTV 'Track Record Mortgage', both Financial Reporter and PR platform Newspage asked industry experts for their views.
The majority of brokers and lenders agreed that some form of 100% LTV mortgage was a positive move in the current climate, with one describing it as "a breath of fresh air".
Riz Malik, director at R3 Mortgages: "Kudos to Skipton Building Society for its trailblazing initiative in introducing a product that truly stands out. This is a breath of fresh air in the face of today's economic challenges. It seems the market has been eagerly anticipating a game-changing innovation not only since last September but 2008, and Skipton may have just delivered the masterstroke we've all been waiting for. Given the substantial risks involved with 100% mortgages, we can only expect that Skipton will be meticulously scrutinising applications to ensure it strikes the right balance between risk and reward."
Paul Donoghue, CEO at Concept Financial Services: "Providing an option for rent-trapped clients can only be a positive move in the current market. With the exponential rise in rents, it will give some deposit-strapped tenants the option to seriously look at the opportunity to purchase a property. It makes perfect sense if the level of the mortgage payment is below their current rental commitment and they have a proven track record. It also provides a real alternative to shared ownership that has its disadvantages and still incurs a monthly rental. Skipton will no doubt apply some tough affordability tests to any application, as has been the case with the 95% level of borrowing. It remains to be seen if other lenders look to follow suit. Providing advisers with a range of solutions is crucial in a tougher landscape."
David Hollingworth from L&C Mortgages: “Talk of 100% mortgages may feel like something of a back to the future moment but it’s a very different climate to the days when they were widely available in the market.
"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.
"This deal recognises the fact that hard-pressed first time buyers that have met their rent and household bills over a sustained period of time should demonstrate their ability to meet a mortgage payment lower than their rent, irrespective of the existence of a deposit.
"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 no deposit could risk negative equity 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 new product.”
Brian Murphy, head of lending at Mortgage Advice Bureau: “It’s this innovation that will herald a new era for the property market: one that removes hurdles and creates opportunities. For thousands of first-time buyers who have historically been unable to buy (despite paying rent that could potentially be more than mortgage payments), it unlocks the potential of home ownership and recognises that rental payments have a role to play - something that has long been a sticking point.
"For landlords who want to exit the market due to retirement or the cost of remortgaging, it gives them an opportunity to sell to good, long-term tenants. It’s also set to bring benefits for both buyers and sellers, with reductions in estate agency and legal fees, shorter chains, and a completion day that doesn’t end with a removal lorry still on the drive.
"It’s this thinking that will drive the market forward and is a positive sign of things to come.”
Justin Moy, managing director at EHF Mortgages: "This is a really bold statement from Skipton about the current property and mortgage market. This move suggests the potential for property prices falling any further in the long term is relatively small, whilst the use of a five-year fixed deal may be a way to smooth out any immediate issues with the longer-term gains typically delivered by property. Specific to the current rental market, this will be an ideal solution for those on high monthly rents and limited savings opportunities. Let's not forget this will be quite a niche product, as are the other 100% schemes currently available in the market, but what this does is give some greatly needed confidence to the housing market, and is another opportunity to help people get on the property ladder. Full marks to the Skipton."
Kylie-Ann Gatecliffe, director at KAG Financial: "This is exactly the news first-time buyers needed. While many people will have flashbacks to the Northern Rock days, we all know that back then mortgages were handed out like sweets. Today, underwriting is much more in-depth with affordability checks also far more robust. For those stuck renting with rising costs, it can feel like an uphill battle trying to save, so Skipton launching this is exactly what the market needed. Whilst the fear of negative equity will need to be discussed, given that this is a five-year product it will encourage people to not look at this as a short-term option, which will ensure the house value has a reasonable amount of time to grow to build equity."
However, others raised concerns about a return to 100% LTV lending.
Graham Cox, founder at SelfEmployedMortgageHub.com, said: "I'm amazed the Prudential Regulation Authority has given Skipton the go-ahead to launch this product. It's like we've learnt nothing from the Global Financial Crisis in 2008. I understand the logic of trying to help those who are rent-trapped, and unable to save for a deposit, but to me it's addressing the symptom rather than the cause, which is that house prices are too high. The grave danger is borrowers will overextend themselves. The slightest fall in house prices, and I believe they'll fall significantly over the next 12-18 months. will leave homeowners in negative equity, with the property worth less than the mortgage balance. Not a great place to be if your income drops and you need to sell."
Co-founder and CEO of Wayhome, Nigel Purves, added: "Although the re-introduction of 100% mortgages will no doubt be welcomed by those struggling with the high cost of homeownership, it’s important that anyone considering such a product fully understands the approval process they will be subject to.
"While the concept of purchasing a home without a deposit is attractive, the income multiplier associated with mortgages would still limit the purchasing power of those with lower incomes.
"What’s more, there’s a very real risk of buyers falling into negative equity should property values start to fall. Given the unsettled market conditions seen in recent months, such a change in the market is far from out of the question and could see buyers lumbered with their property and unable to remortgage until such a time that market values recover.
"Rather than loading people up with more debt and negative equity risk, those who are truly serious about solving the housing crisis should be looking at alternative approaches that can solve the problem in a sustainable way that is accessible to more people."
