100% Mortgages – should I get one?

100% mortgages used to be common but they disappeared following the financial crash in 2008. But now a new type of 100% mortgage has launched. We take a look.

What is a 100% mortgage?

With 100% mortgages, you borrow the entire value of the home you want to buy – rather than having to save the minimum 5% deposit up-front. So, if the property you want to buy is valued at £200,000, you would borrow the full £200,000 from the lender and not pay any deposit.

What’s changed with 100% mortgages?

Before the 2008 financial crisis, it was common for lenders to offer 100% mortgages. While some offered mortgages for a greater amount than the property was worth – in some cases up to 125% LTV. However, some people who took out these mortgages are still trapped in their homes which they cannot sell because they have fallen into negative equity.

In the tightening of lending following the crash, 100% mortgages disappeared – with the exception of guarantor mortgages.

However in May 2023, Skipton Building Society launched a 100% LTV mortgage called the Track Record Mortgage. It was originally designed to allow first time buyers to take out a no deposit mortgage, provided they meet certain conditions. However, the criteria has since changed and people who haven’t owned a property in the UK in the last 3 years can now also apply.

How do 100% mortgages work?

Skipton’s 100% mortgage is designed to help renters buy a property without needing a deposit if they have a proven track record of paying rent.

Skipton’s 100% Track Record mortgage is available as a five-year fixed rate at 5.65%, with a maximum term of 35 years. And it’s available at 95%-100% LTV. This means you can take it out with up to a 5% deposit. But there are some strict criteria to meet including needing:

• You haven’t owned property in the UK in the last 3 years.
• Proof of having paid at least 12 months’ rent in a row, during the last 18 months
• Experience of paying all household bills (such as utility bills and council tax) for at least 12 months in a row, during the last 18 months.
• You’ll also need to meet the ‘Household-to-household’ criteria; this means that the same people who are renting now (and have been for the last 12 months) must be the same people applying for the mortgage. So if you’re applying alone, you must have covered the rent and household bills entirely for 12 consecutive months within the last 18 months.
• Each applicant must have no missed payments in the last 6 months
• You can’t get this type of mortgage on a new build flat.
• Each applicant must be aged 21 or over.

Getting a 100% mortgage isn’t something to rush into. However, Skipton says it ‘anticipates high demand for the Track Record Mortgage’, warning it may sell out quickly. So if you’re considering it, don’t delay in finding out more information – our fee-free mortgage broker partners at L&C will be able to help you.

How much can I borrow with 100% mortgages?

Skipton’s 100% mortgage has a maximum loan size of £600,000. Also, the lender says your monthly mortgage payment must be equal or lower than the average of the last 6 months rental cost. For example, if you’ve paid an average of £800 a month on your rent over the last 6 months, the mortgage payment must be £800 or lower. And its maximum loan to income ratio is 4.49.

Use our calculators to see how much you can afford, how much the mortgage will cost you monthly and more.

Other types of no deposit mortgages

There are other types of no deposit mortgages with a 100% LTV available to buyers that work in a different way.

• Guarantor mortgages: This is when a loved one, usually a parent, takes on some of the mortgage’s risk by acting as a guarantor. This usually means them offering their savings or their home as security against the loan and committing to making the mortgage payments if the borrower defaults. For more information read our guide on Guarantor mortgages explained.
• Family offset mortgages: These work in a similar way to guarantor mortgages that use savings as security. Although the main difference is that your loved one won’t earn interest on their savings. But on the flip side, as it’s an offset mortgage, you will only pay interest on the difference between the total value of the mortgage and the value of the savings held in the linked savings account.

The expert view on 100% mortgages

David Hollingworth at our partners L&C Mortgages explains, “Skipton’s Track Record mortgage is attempting to serve a part of the market that has recently been wholly reliant on help from the Bank of Mum and Dad. Renters will have been frustrated by the need to build a big deposit to meet high purchase prices, whilst covering steep rental payments at the same time.

“This deal recognises the fact that hard-pressed first time buyers that have met their rent and household bills over a sustained period of time should demonstrate their ability to meet a mortgage payment lower than their rent, irrespective of the existence of a deposit.

“It won’t solve all the difficulties for all first time buyers and there will be affordability limitations on the borrowing amount which may still not meet the required purchase price.  However, it offers a measured approach that gives credit for the fact that many tenants will have built up a strong track record of managing their housing costs responsibly. 

“There will always be concerns that no deposit could risk negative equity but this is a longer term product for that reason and if it can help some accelerate the move from renting to home ownership it could be a significant new product.”

What are the advantages of a 100 percent mortgage?

Buying a home has become increasingly difficult for first time buyers and those who have previously owned but have fallen off the property ladder, not least because of increasing rents eating into any money they would wish to save for a deposit. In fact, research by Skipton Building Society found eight in 10 tenants feel ‘trapped’ in the rental cycle. So those who have been paying their rent, potentially for years, can now use that ‘track record’ to their advantage in order to help them get on the property ladder using 100% mortgages.

Other potential benefits of 100% mortgages include:

• Being able to start building equity in your property, with the aim of being able to remortgage onto a better deal once the 5 year fixed deal ends.
• The flexibility of being able to buy any type of property with this type of mortgage, excluding new build flats.
• Your mortgage payments will be cheaper or the same cost as renting, although you will have to cover other costs such as maintaining your property.

What are the disadvantages of 100% mortgages?

But there are some potential pitfalls. So if you’re asking ‘Can I buy a house without a deposit in the UK?’ and think 100% mortgages are the answer, you should consider the pros and cons carefully first.

Risk of negative equity

The biggest risk with 100% mortgages is you’re more likely to fall into negative equity – this is when the market value of your property is less than the mortgage you have secured on it. So if you use a 100% mortgage to buy a property for £200,000 and its value drops to £190,000 you would still owe your lender £200,000, minus the amount of capital you have already paid off.

And if you are in negative equity you will have problems if you want to remortgage; you could end up trapped on your lender’s more expensive standard variable rate until you have enough equity in your home to remortgage on to a better deal.

However, the longer you have been paying your mortgage for, the more equity in it you will own (assuming your house’s value doesn’t fall drastically), so your risk of negative equity will be lower. To cut the risk of negative equity further, it’s a good idea to make overpayments on your mortgage if possible. Find out more in our guide What can I do about negative equity?

More expensive

100% mortgages are a higher risk to the lender so rates are higher than the best first time buyer mortgage rates even on 95% LTV mortgages. And with only one 100% mortgage product to choose from, it’s not as if you can shop around for the best rate.

How do I apply for a 100% mortgage in the UK?

The easiest way to apply for a 100 per cent mortgage in the UK is by speaking to a fee-free mortgage broker. They’ll be able to advise you on whether you meet the lender’s criteria for 100% mortgages and also if any more suitable products are available.

To see if the 100% mortgage is right for you, get free expert advice from our partners at L&C. They will help you find the best mortgage for you.

What are the benefits of putting down a deposit?

When thinking about how much deposit you need to buy a house, you will typically need a minimum 5% deposit. If you can save up for a 5% deposit or more, you will have a greater choice of lenders and may be able to access cheaper rates too. But if this isn’t possible, it’s still worth saving as much of a deposit when taking out a 100% mortgage as possible. Even by putting in 3% you will at least have a small amount of equity in your home that you can build on.

How can I save a deposit?

Saving for a house deposit seems like an impossible task? Then make sure you get all the help you can.

• Lifetime ISA: If you’re aged 18-39 you can open a Lifetime ISA, this is a savings account designed to encourage people to save for their first home or retirement. You can save up to £4,000 each tax year into your LISA and the government will give you a 25% bonus on your contributions, up to a maximum of £1,000 per year. Read our Best Lifetime ISA guide for more information.
• Bank of Mum and Dad: If you can get financial help from your parents or grandparents this could make getting enough cash together for a deposit much easier. They may be able to assist with a gifted deposit. Read Bank of Mum and Dad: How to help your child buy a house for more information.
• Budget and slash spending: If you’re saving for a deposit, go through your finances and make a budget and save what you can each month. Having good control of your finances will also demonstrate to lenders that you are careful with your cash. For more tips read our guide on How to save for a deposit

Does my credit rating matter when getting a 100% mortgage?

Yes. Whenever you apply for a mortgage, the lender will look at your credit rating and the better it is, the more likely it is that you will be accepted by a lender. Plus, you may be able to borrow more and at better rates too. In the case of Skipton’s Track Record mortgage, they will check your credit score and they have also specified they need to see that applicants haven’t missed any payments in the last 6 months as one of its lending criteria.

Are 100% mortgages a good idea?

Whether 100% mortgages are a good idea for you will depend entirely on your circumstances. If you can comfortably afford the repayments and can ideally make overpayments on your mortgage you may feel it’s the ideal way to get on the property ladder. Plus you may feel that even if house prices do drop in the near future that they will have recovered by five years’ time.

It is best to get advice tailored to your circumstances from a fee-free mortgage broker. Speak to our partners at L&C today.

Can I get a 100% interest-only mortgage?

No. You will always need a deposit or equity in your home for an interest-only mortgage. Read more in our guide What is an interest-only mortgage?

Are 100% mortgages available on a Buy-to-Let?

No you can’t get 100% Buy to Let mortgages. You will always need to put down a deposit. Plus the deposits for Buy to Lets are usually higher than for a traditional mortgage. You’ll usually need at least a 20% deposit. Read more in our guide Buy to Let mortgages explained.

Can you get a mortgage with an LTV over 100%?

It may be possible to get a mortgage with an LTV over 100% if you’re in negative equity as a few specialist lenders do offer this type of mortgage. Rates can be high though and it’s important to get expert mortgage advice if you find yourself in this situation.

What are the alternatives to a 100% mortgage in the UK?

If you can’t afford to save a 5% deposit, what are the alternatives to 100% mortgages in the UK?

• Shared Ownership: With Shared Ownership, you buy a share of a property (between 10%-75%) and pay rent on the rest. This means you’ll need a smaller mortgage and therefore smaller deposit than if you buy on the open market. And you could increase your ownership stake in the property over time. These schemes are provided by housing associations or private developers. Read more about the pros and cons of the shared ownership scheme.
• First Homes: The government’s First Homes scheme works by offering newly built homes to local first time buyers, including keyworkers, with a discount of at least 30% compared to the market value of equivalent properties. This means you’ll need a smaller mortgage and smaller deposit. But the eligibility criteria is different for different local authority areas and the number of First Homes being built is extremely limited. Read more in our guide to the First Homes Scheme
• Rent to Buy: Rent to Buy lets you to rent a home at approximately 20% below the market rent, allowing you to save for a deposit to put towards your first home. Read our guide on Rent to Buy for more information.

Can you get 100% mortgages for bad credit?

Getting mortgages for bad credit will always depend on your circumstances including what your credit issues were and how recent. So you should speak to a fee-free mortgage broker about your options.

How can I buy a house with no money in the UK?

While you may be able to get a 100 percent LTV mortgage to buy a house you will still need money for other costs relating to your purchase such as the cost of conveyancing fees, stamp duty (if applicable) and the cost of a survey. Find out more in our guide on the Costs of buying a house.

Are there any no deposit mortgage government schemes?

No. There aren’t any no deposit mortgage government schemes. You may have heard of the ‘mortgage guarantee scheme’ however this isn’t something you specifically apply for – its purpose is to stimulate lenders to offer 95% LTV deals. But it’s worth noting that many lenders don’t rely on the scheme for their 95% deals.

Frequently Asked Questions