Director says the initiative will generate consumer interest
With affordability still presenting a clear challenge in the current economy, national operations director at Just Mortgages, John Phillips (pictured), has that said any product innovation that supports those with limited capital will generate consumer interest.
Phillips commented as Skipton Building Society launched a new product that would allow borrowers to bypass standard mortgage deposit requirements by showing their rental payment history.
The lender said its offering was designed to enable people trapped in rental cycles, unable to save a deposit, a foot onto the property ladder.
“It is no secret first-time buyers help drive the entire market,” Phillips said. “Without them, it is much harder for everyone else to move; finding a deposit is easily the biggest challenge facing first-time buyers and products like this offer a solution.
Positive
Even before interest rate increases pushed rents higher, tenants were already used to a large proportion of their income being eaten up by their rental payments and Phillips believed this product could be positive.
“If someone can pay this, then affordability should not present an issue as their mortgage repayments will most likely work out less,” he reasoned.
Phillips believed it was important though to remember the lessons of the past, as no one wanted to return to the days of buyers falling into negative equity. The market was massively different compared to when 100% loan-to-value (LTV) mortgages were last offered, he noted.
Lenders and brokers working on such deals would still need to work together to ensure safeguards were in place to protect borrowers, especially with Consumer Duty coming into force, Phillips said.
“We must also remember the benefit of low deposit solutions to support buyers and fill the void left behind by Help to Buy,” he added.
Whether it was shared ownership, deposit unlock or first homes, Phillips said these had already helped both traditional first-time buyers and single individuals return to the market.
“There are also guarantor-style mortgages and Joint Borrower Sole Proprietor products, which offer a lot of merit and ensures the borrower has ‘skin in the game’ in the form of a deposit,” he said.
Innovation
Phillips said one of the biggest requests he regularly heard from Just Mortgages’ nationwide brokers was for greater innovation from lenders.
“As the market has continued to improve, we have seen lenders chipping away at rates and becoming more competitive on a daily basis,” he said.
If Skipton’s innovation encouraged more first-time buyers onto the ladder and fuelled demand in the wider market, we should certainly expect more lenders to follow suit, suggested Phillips.
It would ultimately come down to each lender’s individual appetite for risk and their willingness to innovate, to ensure this year’s targets were met.
“As ever, brokers will be well placed to help borrowers navigate all product areas to find the best possible solution,” he said.
Skipton’s view
Jennifer Lloyd, head of products at Skipton Building Society, said the lender’s Track Record Mortgage was designed for first-time buyers who were currently renting, unable to save for a deposit, but are keen to get the keys to their first home.
“We were founded in 1853 to help more people to have a home and in our 170th year, the Track Record Mortgage is the latest way we continue to do just that,” Lloyd said.
The building society was responding to a generation of tenants who wanted to own their own home, but just could not save for a 5% deposit.
“They have a proven record of paying rent, and we want to recognise that and help them with this innovative product,” she added.
Do you believe a return to deposit-free mortgages would be a positive or a negative for the market? Let us know in the comment section below.
