It’s a seriously frustrating time to be a renter. Every week seems to bring a new discouraging statistic: rents have skyrocketed and housing demand is vastly outstripping supply. Then there are the stress-inducing anecdotes flooding our WhatsApp chats about flat viewings flooded with despairing potential tenants and bidding wars for rental properties. How are we supposed to cobble together a deposit for a home when vast swathes of our monthly income are going straight to our landlords? It’s a conversational refrain that crops up again and again.

A new mortgage from Skipton Building Society, aimed at first-time buyers who are currently trapped in the rental market, looks set to try and answer that particular question. Its no deposit deal is intended to fill a gap in the market for people who have struggled to buy a property due to a lack of savings or access to family wealth, Skipton’s chief executive Stuart Haire told the BBC.

Instead of a deposit, the deal will require proof of at least 12 months of rental payments and a good credit history. No guarantor would be needed, in contrast to a few other zero-deposit schemes currently on the market, which require security from a family member or a friend. According to the BBC, it would have a 5.49% interest rate.

So, is this the change that renters have been waiting for? Forbes Advisor’s mortgage expert Laura Howard says the new deal is a “welcome step” towards levelling out the playing field for renters, who have historically “been at a disadvantage when it comes to getting on the property ladder”.

It makes sense that renters can use their rental history as proof they’ll be able to afford mortgage payments, she adds: “Paying your full rent on time in long-term monthly succession is no easy feat. Average UK rents are now a staggering £1,999 a month according to Homelet, almost 10% higher than in April last year.” Indeed, in many cases, Polly Gilbert, marketing director at Tembo, notes that “monthly mortgage payments might be the same or even less than rent”.

But while Gilbert welcomes more innovation in the mortgage market to solve the affordability gap, she notes that this is not going to be a “magic bullet. One product isn’t going to change the market for first-time buyers. There are so many hurdles for them to overcome.” While this deal, she says, might help a couple renting together, or someone living alone, it won’t necessarily work for house sharers: “You need to show that you’ve paid the rent and household bills in full.”

“Borrowers will be tied into an expensive 5.49% [rate] for the next five years, which is around 1% higher than the equivalent first-time buyer 95% loan,” Howard says. “While this could still be cheaper than the cost of renting, it’s a long-term commitment to an inflated rate and penalties apply for breaking the term early.”

House prices are dropping, and so borrowers with a 100% mortgage will be standing on the precipice of negative equity, Howard adds, which is when your home is worth less than the mortgage you took out on it. “Being in negative equity means you can’t move house unless you can plug the shortfall with your own cash,” she says, although she does note that the five-year tie-in might prevent people from moving anyway, and things could look very different by 2028.

Dan Wilson Craw, acting director at campaign group Generation Rent, says: “It’s likely that only a small number of people would stand to benefit from this mortgage.” To meet the financial checks, potential buyers would already have to be high earners. “To pass the various affordability criteria, borrowers would need to be earning much more than the average household income, and so would be more able to save for a deposit in the first place,” he says. 

The UK’s shortage of affordable housing also remains a serious problem for first-time buyers. “If this [mortgage] did take off, we would be concerned that without measures to increase the availability of homes, we would have more borrowers competing for the same number of homes, and that would just push up prices,” Wilson Craw adds. “Then further down the line the government and lenders would try to come up with another scheme to help first-time buyers get a mortgage to pay the inflated prices. Where would it end?

“To properly improve the affordability of housing”, he says, “we need to make more homes available – and that means building more in the places people want to live. More houses mean lower rents, and tenants able to save more in the first place.” 

Images: Getty