Finance experts urged caution as a major building society unveiled a 100 per cent mortgage aimed at renters.
A zero-deposit “track record” loan for those who demonstrate a history of paying rent on time has been launched by Skipton Building Society.
It comes as Leeds Building Society is offering a package where payments to subscription services such as Netflix could help customers get a mortgage by improving their credit score.
Skipton has introduced its deal despite fast rising interest rates, with the Bank of England expected to raise the base rate by a further 0.25 per cent to 4.5 per cent tomorrow, adding around £375 a year to the cost of a £150,000 loan.
Skipton’s package offers a mortgage at 5.49 per cent interest with a repayment period of up to 35 years and a maximum monthly payment capped at the amount customers have been paying in rent.
The rate is fixed for five years and is available for first-time buyers aged 21 and over with a minimum of 12 months’ rental history.
But experts have voiced reservations – even though the deal could help aspiring homeowners get off the rental treadmill.
Nigel Purves, the co-founder and CEO of Wayhome, said: “There’s a very real risk of buyers falling into negative equity should property values start to fall.
“Given the unsettled market conditions, such a change is far from out of the question and could see buyers lumbered with their property and unable to remortgage until a time market values recover. Those who are truly serious about solving the housing crisis should be looking at alternative approaches that can solve the problem in a sustainable way that is accessible to more people.”
But David Hollingworth, associate director at broker L&C Mortgages, countered: “There will always be concerns no deposit could risk negative equity. But this is a longer-term product for that reason and if it can help accelerate the move from renting to ownership it could be a significant.”
Meanwhile, Leeds Building Society has teamed up with credit information company Experian to boost customers’ credit rating.
The service allows extra evidence of a borrower’s good financial track record to be factored into lending decisions. It means the previous 12 months of regular debit payments, such as council tax and subscriptions to Netflix or Spotify, can be included in mortgage applications.
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