Renters warned about heavy debts as lender confirms 100% mortgage

Leading building society Skipton has confirmed it is to offer a 100% mortgage to renters amid warnings that the debt burden could be disastrous for some people.

The lender, which is the parent company of Connells and Countrywide, is to provide deposit-free home loans to tenants who can prove they pay their rent on time, according to The Times.

Stuart Haire, Skipton’s new CEO, said last month that the new mortgages would be targeted at first time buyers ‘trapped by high rents’.

Haire took up the reins at Skipton in January, replacing long-serving David Cutter who led its successful effort to buy Connells 12 years ago.

The Bank of England is to announce its latest decison on interest rates on Thursday, wth some predicting further rises.

Real risk

Part-own part-rent provider Wayhome has warned that renters could saddle themselves with too much debt and possible negative equity.

Nigel Purves, co-founder and CEO of Wayhome, says: “Although the re-introduction of 100% mortgages will no doubt be welcomed by those struggling with the high cost of homeownership, it’s important that anyone considering such a product fully understands the approval process they will be subject to.

“While the concept of purchasing a home without a deposit is attractive, the income multiplier associated with mortgages would still limit the purchasing power of those with lower incomes.”

“Those who are truly serious about solving the housing crisis should be looking at alternative approaches”

He says “there’s a very real risk” of buyers falling into negative equity if property values fall.

“Rather than loading people up with more debt and negative equity risk, those who are truly serious about solving the housing crisis should be looking at alternative approaches that can solve the problem in a sustainable way that is accessible to more people.”