A new deal from Skipton Building Society offers tenants the chance to get a mortgage with no down payment required.
The BBC traveled to the North Yorkshire market town, home of the building society, to see if potential buyers were sold on the idea.
“A house is made of walls and beams, a home is made of hopes and dreams,” reads a sign in a furniture shop on Skipton’s busy High Street.
However, for those currently renting in and around the market town, for many the only way to make that dream a reality is to move away.
“There are so many people like me who need affordable housing,” says 24-year-old Holly Wardman, who lives in the nearby village of Carlton, where rent is cheaper.
“The build is huge single-family homes for people who already own their own homes and have double incomes – they’re not thinking about people my age.”
Ms Wardman, a teacher who works across the nearby Lancashire border, says her initial enthusiasm for the 100 per cent mortgage quickly evaporated after using the company’s affordability calculator.
Skipton Building Society’s new mortgage offer is available for the same amount you currently pay in rent, so the total for Ms Wardman is £625 a month.
“When they put it into the calculator it said I could borrow just over £116,000. There’s no way I’m getting anywhere in Skipton for that money,” she says.
For a house similar to the two-bedroom she’s currently renting, she calculates that it would be £109,000 less than the £225,000 she would need.
She says she would meet the other requirements, which are 12 months of rent payments on time and a good credit history.
“They don’t think about people my age, it’s like they don’t want us to stay around and move to the cities,” she says.
- The average property price in Skipton, which has a population of around 15,000, was £244,145 in September 2022
- The market town is made up of four boroughs, with the average living space in each borough ranging from £176,827 to £345,678
- Craven, the larger borough, has an average house price of £245,000 (as of September 2022).
- In Craven, full-time workers could expect to spend 8.29 times their annual income to buy a home in the county
- A decade earlier, the ratio was 7.40 times their annual income
Source: Office for National Statistics
Aidan Sherrington, a 26-year-old lecturer at Craven College, heard the mortgage news on the radio during his 20-minute drive from Colne in Lancashire to Skipton.
“I thought it would be a nice touch, but I think it’s a band-aid that doesn’t really solve the problem,” he says.
“The average rent in Skipton is around £800 for a two bedroom house. If you were to pay just £800 on the mortgage you would probably never pay it off at the rate of interest, or you’d pay it off over 40 years – it’s just depressing.”
The interest rate on Skipton’s latest 100 percent contract is 5.49 percent, more expensive than the current average five-year corporate contract of 5 percent.
According to financial data company Moneyfacts, there are 15 other no deposit products on the market, but unlike the Skipton product, they all require the financial backing of a guarantor.
“If buying was a lot easier, we would do it,” says Mr Sherrington, who rents with his partner.
“There’s a catch: do you go somewhere that’s further out, where it’s remote but cheaper and you can buy, or do you go somewhere and rent where you can’t buy anything?”
He adds: “As long as inventories don’t go up and prices go down, the availability of mortgages isn’t going to change our access to housing.”
- First-time Home Buyers: How Much Can I Borrow?
- Be careful with 100 percent mortgages, homebuyers said
- Introduction of a deposit-free mortgage for tenants
The lender, the UK’s fourth-largest building society founded in the city in 1853, said it had spotted a “niche in the market” as rising rents and the cost of living limited savings on deposits.
In nearby Silsden, independent mortgage adviser Mortgages with Hannie & Co said it received a “record” 100 inquiries about the product within 24 hours of the announcement.
Meanwhile, Skipton town center-based mortgage advisor Dan Wearden believes the product will “help a lot of people”.
“It’s going to encourage competition and invigorate the market a bit. I think it will stimulate new product releases,” says Mr Wearden of AJ Hird.
“I had some concerns at first, but then read the terms and conditions, which answered a lot of my questions.”
No deposit mortgages are considered riskier loans and were one of the triggers of the 2008 financial crisis when many borrowers could not afford the repayments.
On Thursday, the Bank of England warned that risks need to be “well assessed” by both lenders and borrowers.
“There are many more criteria and regulations than before,” says Mr Wearden.
“I now feel comfortable recommending these offerings.”
Estate agent Tom Exley says he would “live 100% in Skipton tomorrow” if he could as his office is busy taking requests for viewings of properties for sale and rent.
“Right now we’re putting a property on the market in Skipton and we have five applications for it coming in within a week,” he says.
“Due to the scarce supply, rents have risen massively, there are also many first-time buyers and the properties are sold out very quickly.”
Mr Exley, a director at Carling Jones, says property prices have “gradually gone up”, with the rise in holiday rentals being one of the most significant changes in his eight years working in and around Skipton.
“People want convenience, either in Skipton or in a nearby village,” he says.
“It will be interesting to see over the next few months how easy it is for applicants to get the mortgage once it’s gone to insurers.”
Katie Fox, a 26-year-old security officer who commutes from Burnley to Skipton every day, hasn’t found joy in constantly scrolling through available properties on her Rightmove app.
“I looked into Skipton but it became very obvious that it’s not feasible for one person or maybe even two people at this point,” she says.
Ms Fox was living with her family to save for bail but “liked the theory” of the 100 per cent mortgage.
“It’s not just people my age, but also older people in the area who can’t afford houses,” she says.
“When you’re stuck in this rental loop, you can’t save on rent, so I think it’s a good move — it can give people hope.”
Photos by Tom Airey
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