A 100% mortgage lets you take out a home loan for the full value of a property, so you don’t need to save up for a deposit. Here we explain how they work, if you can get a 100% mortgage and what you need to consider before you apply.
When buying your first home, you normally need to save up around 10% of the value of the property as a deposit. A bank or building society will then loan you the rest.
Before 2008, it was fairly common for lenders to offer standard home loans without a deposit required – some were even offering more than the value of the property. After the financial crash, these types of mortgages were pulled from the market.
In May 2023, Skipton Building Society launched a first-of-its-kind100% mortgage to help renters get a foot on the property ladder. From September, the building society began offering 100% mortgage to renters who had previously owned homes.
In this article, we cover:
- What is a 100% mortgage?
- How much can I borrow with a 100% mortgage?
- What are the risks of a 100% mortgage?
- Can I get a 100% mortgage from Skipton?
- Are there any other options out there?
Read more: Will mortgage rates go down in 2023?
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Explainer about 100% mortgages, who can qualify and how your regular payments can contribute towards your credit check
What is a 100% mortgage?
Saving for a deposit has become much harder for first-time buyers, with rising house prices and soaring rents. The average amount required ranges from £30,198 in the North East to £125,378in London.
With a 100% mortgage – or zero deposit mortgage – borrowers don’t need to put down any money upfront. The bank or building society will loan you the full value of the property.
You will still have to save up for other fees and expenses though, such as solicitor and surveyor fees and the cost of moving.
These types of mortgages used to be previously fairly common, but were axed in the wake of the financial crisis in a crackdown on risky lending.
Where can you get a 100% mortgage?
Skipton became the first big lender in May 2023 to offer a 100% mortgage since 2008. Find out more about it, including who is eligible.
How much can I borrow with a 100% mortgage?
How much you can borrow will depend on your own personal circ*mstances.
Before you are accepted for a mortgage, a lender will look carefully at your credit worthiness, your income and spending.
Looking for a mortgage? Try this free mortgage comparison tool to help you find the best deal
What are the risks of a 100% mortgage?
The big concern around 100% mortgages is that it can increase the risk of negative equity. This is where the value of a property falls, meaning you owe more than your home is worth.
If you have bought without a deposit, the amount of equity they have is even lower.
Figures show that house prices are now beginning to fall, raising the risk of negative equity.
This could create problems for both buyers and lenders. It means homeowners won’t be able to sell and banks will be stuck with properties that are worth less than the loan – raising the threat of another potential crash.
These types of mortgages tend to be more expensive. For example Skipton’s Track Record Mortgage has a fixed rate of 6.19% for 5 years. The cheapest 90% LTV 5 year fix is 5.49% from Skipton.
Read more: Track record mortgage: can my Netflix subscription help me get a loan?
How does Skipton Building Society’s 100% mortgage work and can I get one?
Skipton Building Society launched a 100% mortgage product called a ‘Track Record Mortgage’ in May 2022 aimed at renters struggling to save for a deposit.
You can borrow from 95% to 100% of the value of the property up to £600,000, meaning you do not need to provide a deposit if you don’t want to. It takes the form of a five-year fixed-rate mortgage charging annual interest of 6.19%, with no fees to pay.
To be eligible applicants:
- Must either be first-time buyers who have never owned a property, or renters who have previously owned a home but not during the last three years
- Aged 21 or over
- Have less than a 5% deposit
- No missed payments on debts or credit commitments over the last 6 months, as a minimum
- Have proof of having paid at least 12 months’ rent in a row in the UK, during the last 18 months
- Have experience of paying all household bills (e.g utility bills, council tax etc.) for at least 12 months in a row, during the last 18 months
- Not looking to buy a new build flat
The average five-year fixed mortgage is currently around 6.2% according to Moneyfacts.
Applicants will face stringent affordability checks and credit scoring to ensure they will be able to make mortgage repayments.
If you aren’t eligible, we cover what government schemes are out there in our guide for first time buyers.
Looking for a mortgage broker? We list the best mortgage brokers in the UK.
How much can I borrow with Skipton’s 100% mortgage?
To ensure applicants can afford the mortgage, Skipton is capping the maximum monthly repayment at their average monthly rental costs over the last six months. This determines the overall amount you can borrow.
Below are the various amounts you can borrow from Skipton Building Society based on different monthly rental payments (assumes loan of 100% of the property’s value with a mortgage term of 30 years):
| Average monthly rent over the last six months | Maximum amount you can borrow if approved for Skipton’s 100% mortgage |
| £300 | £52,900 |
| £600 | £105,800 |
| £800 | £141,000 |
| £1,000 | £176,300 |
| £1,250 | £220,375 |
| £1,500 | £264,450 |
| £2,000 | £352,600 |
Are there any other options out there?
As well as the new Skipton product, there are some options out there already, but most require a cash guarantee from a friend or relative, which works as a sort of security for the bank.
Barclays offers a 100% family springboard mortgage which requires the applicant’s family member to put 10% of the purchase price into a cash savings account, which they cannot access for five years.
Loughborough Building Society allows family members to put a cash lump sum into a designated account or agree to accept a legal charge over their own home, or a mix of the two, via its family deposit mortgage.
In 2021, the government also launched a new mortgage guarantee scheme – but you need a deposit to access it. Through the scheme, the government ‘guarantees’ 95% mortgages for buyers with 5% deposits on homes of up to £600,000.
The initiative was launched in April 2021 in an attempt to encourage banks to start offering 95% mortgages again, after nearly every single one was withdrawn during the pandemic.
Under the terms of the mortgage guarantee scheme, the government guarantees the portion of the mortgage over 80% (so, with a 95% mortgage, the remaining 15%). This might sound complicated, but in practice it just means the government will partially compensate the lender if a homeowner defaults on their repayments.
Want to know how much mortgage you can afford? Try our free mortgage calculator.
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