Skipton Building Society has launched a 100 per cent loan to value (LTV) aimed at helping renters get onto the property ladder without the Bank of Mum and Dad or guarantors.

The product, called the Track Record mortgage, comes with a five-year fixed rate term starting at 5.49 per cent over a maximum term of 35 years.

Tenants can between 95 per cent and 100 per cent of the property’s value, and the product is eligible for tenants aged 21 and over and first-time buyer purchases only.

It has a maximum loan size of £600,000, and applicants can have no missed payments on debts or credit commitments in the last six months.

It comes with no fees, and is subject to affordability and credit score as well as evidence of 12 months of good track of rental history.

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The lender added that it would ensure monthly mortgage payments for each applicant are not more than the average of the last six months rental costs they have paid.

For example, if a tenant has paid £800 per month over the last six months, then their maximum mortgage payment will be £800.

New build flats are not eligible for the product.

‘People trapped in renting is one of the UK’s biggest housing challenges’

Skipton Building Society said that the average rent in Great Britain was £1,290, so with an applicant borrowing a 100 per cent LTV mortgage with an interest rate of 5.49 per cent over 35-year mortgage term it could lend up to £240,509. This would equate to £1,290 per month in mortgage payments.

Charlotte Harrison, CEO of home financing at Skipton, said: “We need to tackle the UK’s housing affordability crisis to enable more people, especially renters who are trapped in renting cycles, to buy their first home.

“People trapped in renting is one of the UK’s biggest housing challenges, having a massive impact on the fabric of our society. With escalating rents and the cost of living squeeze further impacting people’s ability to save for a house deposit – it’s making it almost impossible for people get onto the property ladder.”

She said that there was a “clear gap in the market” for people with a strong rental payment history and who could evidence affordability of a mortgage, but there were currently no solutions for them to buy a property due to a lack of savings or access to family wealth.

“It is time for a re-think on these massive barriers to home ownership, and we’re proud to take the lead on bringing to the market, solutions for such a massive social problem.

“This is why we’re introducing our track record mortgage. It has been carefully created with the challenges generation rent is facing in mind, together with the potential risks and challenges they may encounter in the future too. In building our mortgage product with these challenges at the centre we’re ensuring considerations around negative equity have been fully taken into account,” she added.

Product will help some get off ‘rental treadmill’

Brokers said that the return of 100 per cent LTV mortgage could be beneficial for first-time buyers and solve the challenge of raising a deposit. However, they raise concern of credit equality and negative equity.

Andrew Montlake, managing director of Coreco, said that in current era the “gap between the haves and the have nots is increasing, especially when it comes to getting onto the housing ladder”.

“There are many potential buyers who have proved they can afford to pay rent at the current high levels, but just do not have the means to meet ever increasing deposit levels and feel constantly at the mercy of rising rents.

“Whilst I have had some concerns in the past, the time now seems right for a new type of 100 per cent LTV mortgage, one that is underwritten prudently and where affordability is carefully taken into account. The Skipton product is different to those of yester-year, as it is linked to the rent currently being paid and the mortgage payment cannot be more than the average of the borrowers last six months rent,” he noted.

Montlake said that this product may not be suitable for everyone but it “will help some of the new generation of home buyers get off the rental treadmill and enjoy the security of owning their own home”.

“It is important that we recognise also the need to change our thinking that property is a short-term investment, and realise it is a long-term home for us to build our memories in,” he said.