Several months ago, we reported that Skipton Building Society, a prominent name in the mortgage market, were launching 100% mortgages to new borrowers. Essentially allowing borrowers to get a mortgage on a property without putting down the normal minimum 5% deposit. This week Skipton has announced a series of rate reductions to it’s 100% mortgage products, supporting its commitment to helping first-time buyers and existing customers who would otherwise struggle to get a mortgage.
Rate Reductions For 100% Mortgages
This well received reduction will see Skipton’s ‘Track Record 100%’ mortgage experience a substantial rate drop of 0.15%, bringing it down to a highly competitive 6.29% in todays market. Effective from 9 a.m. today, 18th August 2023, this reduction is expected to make a significant impact on aspiring homeowners looking to step onto the property ladder without the traditional deposit requirements. Although not an incredibly low rate, this 100% mortgage rate reduction to 6.29% does come close to average mortgage rates in the UK which currently sit between 5% and 6%. Could we see more reductions for higher LTV products from Skipton and other lenders in the near future?
But this reduction to 100% mortgage was not the only rate reductions announced by Skipton. The building society has revealed several other competitive product reductions across their product range. Some of these other reductions are:
1. A five-year fixed residential offer at 95% loan-to-value (LTV), with the added advantage of no fee, witnessing a substantial rate decrease of 0.22% to 6.02%.
2. A two-year fixed residential deal at 60% LTV, accompanied by a nominal £1,495 fee, experiencing a 0.06% reduction to an attractive 5.96%.
3. A five-year fixed buy-to-let loan at 60% LTV, incorporating a reasonable £1,995 fee, witnessing a rate cut of 0.12% to an enticing 5.62%.
Benefits and Risks of a 100% Mortgage
Skipton’s ground breaking 100% loan-to-value mortgage, released in May 2023, has been a magnet for attention within the industry. Representing one of the first no-deposit offerings by a major lender in a number of years, this innovative product has sparked a lot of discussions about its potential implications. Of course the bright side is always that more people struggling to save a deposit will be able to purchase a property, however the debate about risk and potential for negative equity is one that is hard to argue.
What do we mean by this? A lender providing a 100% immediately increases the risk of the lending for the lender and opens up a lot of avenues for the bank or building society to potentially lose money. And for the borrower, there is a real risk of potentially owing more on the property than it is worth. For example, if you bought a property for £250,000 with a 100% mortgage, that’s great. But what if you try to sell it two years later and the value has dropped to £230,000. You could still owe the bank £240,000 which means that if you did sell, you would make no profit on the property and actually owe the bank a further £10,000.
However, Skipton Building Society has been firm in its stance, asserting that the 100% mortgage offering was conceived with the intention of providing a lifeline to a significant portion of the UK’s renting generation, totalling approximately 4.6 million people. By allowing these people to take their initial steps towards homeownership without having to save large deposits, Skipton aims to contribute positively to the housing landscape, enabling dreams of property ownership to become a reality for those who have been navigating the expensive rental market for a number of years.
Speak To a Mortgage Broker About Small Deposit Mortgages
If you are a first-time buyer or simply don’t have the funds available for a large deposit, then please feel free to give our team a call. We can offer help and guidance with small deposit mortgages. Call or email us today to set up an initial mortgage consultation. We are here to help.