Skipton Building Society has today confirmed the launch of 100% loan to value (LTV) mortgages aimed at renters without a deposit who want to buy a property.
If you are renting a 1 bedroom apartment worth £150,000 in Newquay, Cornwall, you can expect to pay rents of between £600 and £750 pm.
If you are renting a 2 bedroomed apartment worth £240,000 in Newquay, Cornwall, you can expect to pay rents of between £800 and £1,000 pm.
To secure a 100% LTV deal, you will need to demonstrate you can afford the monthly repayments and also prove a 12-month 'no arrears' rental history.
The pros to 100% LTV mortgages are:
The cons to 100% LTV mortgages are:
History tells us, when we look back to the late 1980s and early 1990’s that the property boom in the 1980’s was then curtailed when interest rates peaked in 1989 to 15%+ and then many property owners were trapped with negative equity after house price falls between the summers of 1989 and 1993 of around:
The only exceptions being +4% in the North West, +28% in Northern Ireland and +10% in Scotland for the same period. Source: Nationwide Property Price Calculator.
What this tells us is that where there has been strong property demand and price rises during and after Covid-19, virtually zero interest rates and stamp duty holidays, those inflated prices may now be about to fall back. Skipton Building Society is taking a risk in the current market. We hope their analysts and actuaries have called the market correctly and that history does not come back to repeat itself with negative equity.