Skipton Building Society recently launched a 100% mortgage offer exclusively for first time buyers.
It is only available to First Time Buyers who can prove they have been renting for at least the last 12 months and without defaulting on rental payments.
The deal is fixed-term for five years at 5.49%, 0.49% above their current normal five-year fixed deal of 5%.
Positives
On the plus side, this is a potentially really attractive offer for people who have been renting for years, and stuck there because of the ever increasing cost of housing and cost of living making it increasingly difficult to save up for a deposit.
This is especially good for younger people: today the owner-occupier rate for 25-34 year olds is 41%, compared to 67% in the mid-1990s.
This may well be the only way younger Millennials and now Gen Zs can get on the property ladder, and paying off a mortgage even at 5.5% will work out at similar monthly repayments to paying rent in most cases over a 30 year term.
Possible downsides...
Well it was such mortgage deals which triggered the the 2008 financial crisis... overly generous LTV deals which too many borrowers couldn't afford to pay back.
And the risks aren't insubstantial...
Property prices in the UK are sky high, demand from abroad isn't that great, and being a second home owner and renting is less appealing than ever, so there are downward pressures on property prices, in fact a fall of 0.3% on average is predicted for next year.
Then there's the continuing increase to the cost of living. Despite (the necessary) optimism from the Bank of England, near double digit inflation figures have persisted for longer than they would have hoped.
Then again...
A five year fixed deal at least gives FTBs a window of stability in regard to their repayments.
And the selfish Tories aren't likely to relax planning laws to allow the 3 million extra homes we need to be built in the UK to bring us in line with development in the rest of Europe, where property price increases over the last twenty years have been much less rapid.
And this is only one deal for a very small number of people, relatively speaking.
So on balance, I think this is a cautious win!
Postcript...
On a personal note I have a bit of a soft spot for Skipton as I've currently got my own relatively small mortgage with them.
They're an odd company... you need to send them physical copies of documents to get anything approved, they don't accept emails, it's like going back in time to the 1980s.
Oh, those were the days!
