LONDON — It isn’t just in the U.S. where would-homebuyers are struggling with affordability. In the U.K., lenders are increasingly introducing low- and no-deposit mortgage products aimed at helping first-time buyers enter the housing market, as financial institutions loosen lending criteria and develop new products to address affordability challenges, according to one new report.
Among the latest offerings is a new mortgage from Metro Bank that allows eligible first-time buyers to borrow up to 100% of a property’s value, marking a continued return of products that largely disappeared after the 2008 global financial crisis.
The Guardian reported that Metro Bank’s launch follows a widely promoted mortgage from Lloyds Bank that requires a minimum deposit of £5,000. The five-year fixed-rate loan carries an interest rate of 5.89% and is available on properties valued at up to £300,000.
Additional Offerings
Other lenders have introduced similar products:
- Santander offers a five-year fixed mortgage allowing borrowers to finance up to 98% of a property’s value, with a £10,000 minimum deposit and loans up to £500,000.
- Skipton Building Society offers a 100% mortgage for current and recent renters on homes valued up to £600,000.
- Yorkshire Building Society has introduced a 99% loan-to-value mortgage with a maximum loan of £495,000.
The Guardian also reported that lenders are expanding the use of joint borrower, sole proprietor (JBSP) mortgages, which allow family members—and in some cases friends or other relatives—to help boost a buyer’s borrowing capacity without becoming legal owners of the property. Under these arrangements, all borrowers remain legally responsible for mortgage repayments.
Mortgage brokers interviewed by The Guardian said demand for JBSP loans has increased as home prices continue to outpace affordability.
Family Members Needed
Metro Bank’s new JBSP mortgage allows qualified borrowers to finance up to 100% of a home’s value if an immediate family member agrees to serve as a joint borrower. The five-year fixed-rate mortgage carries a 6.99% interest rate and a maximum loan amount of £675,000.
The Guardian noted that while these products reduce or eliminate the need for a down payment, they generally carry higher interest rates than conventional mortgages. Standard mortgages requiring a 5% deposit currently start at roughly 5% for fixed-rate loans, with lower rates available to buyers able to make deposits of 10% or more.
David Hollingworth of L&C Mortgages told The Guardian that while some prospective buyers may benefit from continuing to save for a larger deposit, others may find that low- or no-deposit products offer a faster path to homeownership, particularly as rental costs remain high.
