Building societys new mortgage aims to get renters back on property ladder

Former homeowners turned renters can now get a helping hand back onto the property ladder, according to a building society.

Skipton Building Society is expanding the pool of aspiring homeowners who can apply for its track record mortgage, to support more “trapped renters”.

The move could potentially help people who have previously moved out of homeownership back into the rental sector due to a divorce or needing to relocate, for example.

The “zero-deposit” mortgage deal was previously launched in May, aimed at first-time buyers, and since then, Skipton said it has received more than £40 million in mortgage applications.

More than half of applicants so far have been purchasing terraced homes and nearly a fifth (17%) of applicants have been located in Scotland, the society said.

Skipton announced on Monday that people who were previously homeowners, but who have not owned a home in the past three years, can now also apply for the deal, as well as first-time buyers.

The society’s track record mortgage is a five-year, fee-free, fixed-rate product with a rate of 6.19%, over a maximum term of 35 years.

Figures from Moneyfactscompare.co.uk on Friday last week showed the average, five-year, fixed, residential, homeowner mortgage on the market was 6.19%, although this was across all deposit sizes, whereas with the Skipton deal people can get on the property ladder with no deposit.

When the deal was launched in May, the society made it available generally for first-time buyers across Britain. Tenants aged 21 and over may be able to take out mortgages at between 95% to 100% of the value of the property they want to buy.

In return, they will need to demonstrate a strong track record of paying their rent, with evidence of a minimum of 12 months of rental history.

This evidence could be provided through bank statements or a letter from a suitably registered letting agent, for example.

Skipton said that, as a responsible lender, it is ensuring the monthly mortgage payment for each applicant is not more than the average of their last six months rental costs that they have paid.

For example, a tenant paying an average of £800 per month over the last six months would have a maximum monthly mortgage payment of £800.

In the terms and conditions for the track record mortgage deal on its website, Skipton said that it will not lend on new-build flats but it does accept applications for new-build houses.

Charlotte Harrison, CEO of home financing at Skipton, said: “Following the successful launch of our track record mortgage for first-time buyers, we have actively reviewed the product and listened to customer feedback, focusing on how we can develop it further to help more people break free from being stuck in trapped rental cycles.

“I’m proud to announce that, from today, we’re expanding the eligibility of the product to include renters who have previously owned a home.

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“Sadly, there are a number of reasons why people fall off the property ladder, from divorce, to relocating to a new area, and even critical illness. However, for many, the climb back onto the property ladder can be a difficult one, leaving many trapped renting, even after previously owning their own home.

“Significant rises in house prices over recent years, on top of the associated costs that come with buying a home, means even after retaining equity from a previous property sale, securing a deposit while renting is still a blocker for those trying to get back onto the ladder.

“We launched our track record mortgage because we recognised a clear gap in the market for people who have a strong history of making rental payments over a period of time and able to clearly evidence affordability of a mortgage – but there was no solution for them to buy a property due to lack of savings or access to family wealth.

“People trapped in renting is one of the UK’s biggest housing challenges that has a massive impact on the fabric of our society. With escalating rents and the cost-of-living squeeze further impacting people’s ability to save for a house deposit – it’s making it almost impossible for people get onto the property ladder. In expanding our lending criteria, we’ll be able to help more people to get the keys to their own home.”

Published: 04/09/2023 by Radio NewsHub