“We know there isn’t one quick solution to addressing this huge societal challenge of tenants being trapped in renting cycles, with rents escalating faster than mortgage payments and the increasing costs of living, but doing nothing isn’t going to solve this UK housing issue," Harrison adds.
"As a responsible lender, we need to be sensible with our approach for bringing this product to the market and ensure tenants don’t take on more than they can realistically afford.”
Keep innovating
While the risk of properties falling into negative equity has been raised, brokers agree that more product innovation in the mortgage market is good news for clients who have more options to choose from.
Samuel Mather-Holgate, a director and IFA at Mather and Murray Financial, says: “The Skipton product is different as it doesn’t require a guarantor like the other zero equity loans. However, it does cap your repayments at 100 per cent of your rental payments amount.
“This could limit lending in some parts of the country. Understandably, this is one tool the lender is using to ensure affordability and mitigate its own risk of delinquent loans and should be applauded, not criticised.”
Ross Lacey, director and chartered financial planner at Fairview Financial Management, adds: “Something we'd like to see from any lenders who decide to offer 100 per cent mortgages are also product options that borrowers can fall back onto at remortgage time.
“This can provide a safety net to help borrowers avoid being forced to move onto the standard variable rate if they are remortgaging at a time that coincides with being in negative equity.”
The move by Skipton is also being watched closely by other lenders, according to mortgage experts.
Imogen Sporle, managing director – finance property at Finanze, who has already had a number of client enquiries about Skipton, says: “Skipton’s 100 per cent mortgage is different from others in the market as it doesn’t require a guarantor and all the rest do.
"I think other lenders will be watching this market to see how it plays out and if all goes well, I can see more lenders joining this market in the next year or two.
“I think a lot more consideration is going in the underwriting compared to in 2008 where such things as self-certification mortgages were allowed.”
The big difference around previous 100 per cent mortgages from the past is that the rules around this product are much stricter than has been seen in the past and should, in theory, help to prevent the issues that were previously seen.
