Martin Lewis has weighed up the pros and cons of a new mortgage scheme that might be very attractive for first-time buyers.
Skipton Building Society launches its new Track Record Mortgage for renters who are struggling to save up any cash to go towards a deposit for their first home. To be eligible for the scheme, hopeful borrowers must present 12 months of on-time rent payments as well as a good credit history to be approved for a five-year fixed deal.
The scheme is the first of its kind since 2008 due to many blaming lax affordability checks and high loan to value mortgages contributing to the financial crash. Weighing in on the scheme, Martin said he has "mixed feelings" about the new product.
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Writing on the MoneySavingExpert.com website, he said: "Having campaigned for years to try and help mortgage prisoners locked in at hideous unaffordable rates – the spectre of 100% mortgages returning leaves me with mixed feelings.
"Years of property-porn TV shows have spouted the idea that you must buy a house as soon as possible, as big as possible – actually, the real priority is not to over-stretch your finances. Before the 2007 financial crash banks would simply throw mortgage loans out to anyone walking past a branch window; now we need to be more careful.
"So Skipton Building Society's criteria of requiring a good rental track record to prove someone can make mortgage payments is sensible, and so I cautiously welcome it, done carefully after advice, as an option for some."
The scheme is only available to renters and first-time buyers aged 21 and over. Meanwhile, you can only borrow the equivalent of, or less than, what you pay on rent each month - for example, if you pay £1,000 a month in rent, you can borrow £163,000 depending on addordability checks.
MSE has also warned that 100 per cent mortgages come with a greater risk of negative equity if the ultimate value of house prices drop - where the value of a mortgage is more valuable than the property.
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